155 East Tropicana skips interest payment on 8¾% notes, exploring alternatives

By Caroline Salls

Pittsburgh, March 31 - 155 East Tropicana, LLC will not make the interest payment due April 1 on its 8¾% senior secured notes due 2012, according to a company news release.

155 East Tropicana said it has hired Jefferies & Co., Inc. as its financial adviser to help it evaluate financial and strategic alternatives.

The company has 30 days to make the payment before the noteholders can declare an event of default. If 155 East Tropicana defaults on the notes, its credit facility lender could also declare an event of default on the credit facility.

According to a 10-K filed Tuesday with the Securities and Exchange Commission, the company elected to skip the payment because it did not believe that cash on hand and expected cash flows will be adequate to meet anticipated operational expenses, debt service on equipment leases and credit facility, capital expenses and scheduled notes interest payments.

According to the release, 155 East Tropicana expects to attempt to negotiate forbearance agreements with the noteholders and the credit facility lender.

If it is not able to secure a forbearance or enter into a transaction to address its liquidity and capital structure, the company said the noteholders could accelerate repayment of all $135.7 million outstanding on the notes as of March 31 and the credit facility lender could accelerate repayment of the $14.5 million outstanding on the loan.

If either the notes or the credit facility are accelerated, 155 East Tropicana said it would be required to refinance or restructure the debt payments, and failure to refinance or restructure the debt could lead to a Chapter 11 bankruptcy filing.

The company said it currently has sufficient cash of roughly $8 million to fund operations and reserves, and it is generating free cash flow even in the current challenging economic environment.

As a result, 155 East Tropicana said it believes that it has enough liquidity to fund its operating expenses, including buying goods and services and fulfilling all obligations to its employees during the reorganization process.

155 East Tropicana owns the Hooters Casino Hotel in Las Vegas.

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