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Rating Action:

Moody's lowers Riviera Holding's CFR to Caa1; further downgrade possible

23 Apr 2012

Approximately $73 million of rated debt affected

New York, April 23, 2012 -- Moody's Investors Service downgraded Riviera Holdings Corporation's ("Riviera") ratings and placed the company's ratings on review for further possible downgrade. Riviera's Corporate Family Rating ("CFR") was downgraded to Caa1 from B3, its series A term loan and revolver to B3 from B2, and its Series B term loan to Caa3 from Caa2. Moody's also revised Riviera's Speculative Grade Liquidity rating to SGL-3 from SGL-2. The ratings are on review for further possible downgrade.

The downgrade reflects the year over year approximate $2.5 million EBITDA decline at Riviera Las Vegas' property between fiscal fourth quarter 2011 and the prior year, along with the fact that the property reported negative EBITDA of about $8 million for fiscal 2011. Although the company's Black Hawk Colorado property reported positive EBITDA for fiscal 2011 of $9.7 million, Riviera announced that it had entered into an agreement to sell the Riviera Black Hawk to Monarch Casino & Resort, Inc. for $76 million. Since Monarch obtained its Colorado gaming license on April 19, 2012, the sale is expected to close by the end of April 2012.

The review for possible downgrade reflects Moody's view that Riviera may choose not to use all of the proceeds from the sale of the Black Hawk Riviera to repay all of its outstanding debt. Although Riviera's credit agreements require all net proceeds from the Black Hawk sale to be used repay debt, there is a chance the company and its lenders may agree to amend this provision. If that happens, the ratings would likely be downgraded reflecting Moody's view that operating results of the Riviera Las Vegas will not rebound quickly thereby forcing the company to draw on cash reserves to support operations.

Moody's current expectation is that Riviera will complete the sale of the Riviera Black Hawk. However, failure to complete transaction for any reason would also likely result in a downgrade given Moody's opinion that the company in its current form can not meet its debt service obligations without a material improvement in EBITDA.

The review for further possible downgrade will focus on how much of the cash proceeds from the Riviera Black Hawk sale Riviera uses to repay debt. Ratings would likely be downgraded if the transaction closes and Riviera does not fully repay its debt. The review will also focus on Riviera's turn-around plan for the Las Vegas casino.

Ratings downgraded and placed on review for further possible downgrade:

Corporate Family Rating to Caa1 from B3

Probability of Default Rating to Caa1 from B3

First Lien Series A $10 million revolver due 4/2016 to B3 (LGD 3, 35%) from B2 (LGD 3, 35%)

First Lien Series A $50 million term loan due 4/2016 to B3 (LGD 3, 35%) from B2 (LGD 3, 35%)

Second Lien Series B $23 million term loan due 4/2016 to Caa3 (LGD 5, 85%) from Caa2 (LGD 5, 85%)

RATINGS RATIONALE

Riviera's Caa1 CFR reflects the company's small size in terms of revenue and EBITDA, reliance on the loss generating Riviera Las Vegas once the sale of the Riviera Black Hawk closes and the challenges Riviera faces in turning around the operations at its Las Vegas property. While the Las Vegas Strip's recovery is gaining traction, primarily through improved hotel occupancy, the Riviera Las Vegas' EBITDA has not yet benefited from these trends. Riviera's lack of diversification makes it more vulnerable to regional economic swings, market conditions, promotional activity, and earnings compression.

The principal methodology used in rating Riviera Holdings Corporation was the Global Gaming Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Riviera Holdings Corporation owns and operates the Riviera Hotel and Casino in Las Vegas and the Riviera Black Hawk casino in Colorado. The company generates approximately $120 million in net revenues annually.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information, [and] confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's lowers Riviera Holding's CFR to Caa1; further downgrade possible
No Related Data.
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