Riviera Holdings files for bankruptcy

LAS VEGAS, Nevada -- Riviera Holdings Corp., the parent of the similarly named Strip casino and two affiliated companies, on Monday filed bankruptcy for the third time in three decades.

The companies' prenegotiated bankruptcy restructuring gained the support of more than 75 percent of the debtholders.

Also filing for bankruptcy protection were Riviera Operating Corp., which does business as the Riviera Hotel on the Strip, and Riviera Black Hawk, which does business as the Riviera Black Hawk Casino in Colorado.

The companies filed under Chapter 11, which allows them to continue operating while they go through bankruptcy.

"When we come out (of bankruptcy), the company will be a lot stronger and ready to turn a new page," Riviera Holdings general counsel Tullio Marchionne said.

The company, which has 1,300 employees in Las Vegas and 260 in Colorado, said it will continue to pay employees and vendors and honor customer deposits. Marchionne said the company is already down to its "fighting weight" and expects no further layoffs.

Even in bankruptcy, casinos "generally don't shut down, because they are still capable of producing an operating profit and cash flow over and above general expenses," Gerald Gordon of law firm Gerald Silver said in an interview a year ago. "What they can't do is pay the debt at levels where they now exist."

His firm filed the bankruptcy petitions for the Riviera companies. The Riviera group is the third major casino operation to seek bankruptcy shelter during the current recession. Herbst Gaming was first, followed by Station Casinos, which remains pending.

The filing Monday marks the third time the 55-year-old Strip casino has filed for bankruptcy protection, most recently emerging from bankruptcy in 1993.

Meshulam Riklis, a Turkish-born corporate raider who once owned the five-and-dime chain McCrory Corp., bought the Riviera in 1973 and twice filed for bankruptcy. He also was known for bankrolling his then-wife, actress Pia Zadora.

Riklis lost his ownership interests in the Riviera in the second bankruptcy case.

Riviera Holdings Chairman William Westerman took the company public with shares trading for a time on the American Stock Exchange. He oversaw the expansion of the properties' casino facilities to 150,000 square feet in 1997 and construction of the Rivera Black Hawk Casino in Colorado in 2000. He died in April at 78.

The Riviera, which is on 26 acres of Strip real estate, received several buyout overtures, most recently from Starwood Hotels founder Barry Sternlicht.

Riviera Holdings lost $4.5 million in the first quarter, but its operating loss totaled $629,000.

In April, one investor on the Yahoo message board saw some hope for a turnaround. "This is a gamble anyway you look at it," said jdsfinance.

Riviera shares, which touched $30 a share in late 2007, last traded at 26 cents a share on Friday on the Pink Sheets. The company said it expects shareholders will be wiped out by the bankruptcy.

Marchionne said Riviera Holdings has $270 million in total debt, which will be reduced to $50 million. Some lenders may be willing to provide an additional $30 million in loans, he said