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LAS VEGAS-Ownership of the Hooters Hotel-Casino here recently maxed out its line of credit and missed a $5.7-million payment its $145 million of indebtedness. The company said it has sufficient cash from operations to operate the property but not to make payments on its debt and no access to additional credit. It has retained a third party to help mull over its strategic alternatives.

Located one-half block from the intersection of Tropicana Avenue and Las Vegas Boulevard, Hooters Hotel-Casino was previously the Hotel San Remo. 155 East Tropicana LLC agreed to acquire Hotel San Remo in 2004 for approximately $72.5 million. It then spent approximately $53 million for renovations and operating equipment and an additional $10.1 million in pre-opening expenditures in 2005 and 2006.

The $5.7-million interest payment was due by April 1 and when the 30-day graced period is up lenders will be able to declare the company in default, according to SEC filings. Lenders could already have done so this month–because ownership has not ceded control of its bank accounts as required due to the missed payment–but have not, according to one recent filing. Wells Fargo Foothill Inc. is the servicing agent for the lender group.

If not successful in obtaining a forbearance agreement or entering into a transaction that addresses its liquidity and capital needs, creditors could accelerate repayment. “If we were unable to [refinance or restructure], we may be required to seek protection under Chapter 11 of the U.S. Bankruptcy Code,” the company states in its latest annual report.

155 East Tropicana LLC is two-thirds through Florida Hooters LLC and one-third through EW Common LLC.

Florida Hooters LLC is a joint venture between most of the original founders of the Hooters brand, who hold licenses to operate Hooters restaurants in the Tampa Bay, Chicago and Manhattan areas as well as for wholesale foods, calendars and Nevada hotel/gaming, and a holder of the license rights to Hooters restaurants in south Florida.EW Common LLC is 90% owned by Eastern & Western, which is beneficially owned by Sukeaki and Toyoroku Izumi. Eastern & Western and its affiliates owned the Hôtel San Rémo from November 1988 until our acquisition of the hotel casino in August 2004.

In 2008, ownership terminated a $225-million deal to sell the hotel to an affiliate of an investment group led by NTH Advisory Group LLC after it missed a required $500,000 option carry payment. The would-be buyer made a total of $5.5 million in non-refundable payments toward the purchase.

Under the terms of the May 2007 purchase agreement, Hedwigs Las Vegas Top Tier LLC was to purchase essentially all of the assets of 155 East Tropicana for $98 million in cash, the payment of certain accrued royalties, and the assumption of certain outstanding liabilities, including the company’s $130 million in principal amount of 8 ¾% Senior Secured Notes due 2012.

The sale was supposed to close between October 2007 and April 2008. Hedwigs subsequently made payments to extend the closing date beyond April before missing its June 6, 2008 payment.

Prior to the renovation, Hôtel San Rémo featured 711 hotel rooms, including 17 suites, and an approximately 24,000 sf casino with a sports book. The Hooters Hotel-Casino has 696 hotel rooms; a 29,000-square-foot casino; a Hooters restaurant; a Dan Marino’s restaurant; a tropical pool area featuring beach sand, palm trees, lagoon-style waterfall and Nippers Pool Bar; the Night Owl Club; Pete & Shorty’s Tavern; the Lobby Bar; and SASS, a day spa, salon and workout facility.

The property reopened as Hooters in February 2006 but wasn’t able to achieve the average 95% hotel occupancy rate that was typical of Strip and near-Strip resorts at the time. Occupancy at the property averaged 89.6% in 2007, up from 78.6% in 2006. Occupancy rose to 91.6% in 2008 but it was at the expense of room rates. The hotel’s average daily room rate fell by 18.5% to $66 in 2008 from $81 in 2007. As a result, the company posted a net loss of $13.3 million in 2008, down only slightly from a net loss of $14.1 million in 2007.

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