Item
2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
Credit
Agreement
On April
1, 2009 Riviera Holdings Corporation (the “Company”) received a notice of
default, (the “Default Letter”) from Wachovia Bank, National Association (the
"Wachovia”) with respect to that certain Credit Agreement, dated June 8, 2007
(the “Credit Agreement” together with related security agreements and other
credit-related agreements, the "Credit Facility"), entered into by the Company;
its subsidiaries Riviera Operating Corporation, Riviera Gaming Management of
Colorado, Inc. and Riviera Black Hawk, Inc. with Wachovia, as administrative
agent (the "Administrative Agent”) and as the sole initial lender (before giving
effect to loan participations); Wells Fargo Foothill, Inc., as syndication
agent; CIT Lending Services Corporation, as documentation agent; and Wachovia
Capital Markets, LLC, as sole lead arranger and sole bookrunner. (Since the
closing of the Credit Facility, additional financial institutions have been
added as lender participants.)
The
Default Letter alleges that subsequent to the Company’s receipt of a default
notice on February 26, 2009 (the “Notice”), in connection with the Company’s
failure to comply with the Administrative Agents’ request to provide a deposit
account control agreement, which Notice was reported on Form 8-K filed March 4,
2009, additional defaults and events of default have occurred and are continuing
under Section 7.1(c) of the Credit Agreement with regard to covenant defaults
and 7.1(d) of the Credit Agreement with regard to indebtedness cross-defaults;
including, but not limited to: (i) the Company’s failure to deliver to the
Administrative Agent an audited financial statement without a “going concern”
qualification as required under Section 5.1(a) of the Credit Agreement; (ii) the
Company’s failure to deliver to the Administrative Agent a certificate of an
independent certified public accountant in conjunction with the Company’s
financial statement as required under Section 5.2(a) of the Credit Agreement;
and (iii) the occurrence of a default or breach under a secured hedging
agreement (collectively and together with the event of default, the “Specified
Events of Default”).
The
Default Letter alleges further that in addition to the Specified Events of
Default, potential events of default (the “Potential Defaults”) exist under
Section 7.1(a)(iii) of the Credit Agreement as a result of, among other things,
the Company’s failure to pay to the Administrative Agent; (i) accrued interest
on the Company’s LIBOR rate loan on March 30, 2009 as required under Section
2.8(c) of the Credit Agreement (the “LIBOR Payment”); (ii) the commitment fee on
March 31, 2009 as required under Section 2.5(a) of the Credit Agreement (the
“Commitment Fee Payment”); and (iii) accrued interest on the Companies alternate
base rate loans on March 31, 2009 as required under Section 2.8(c) of the Credit
Agreement (the “ABR Payment”’ and together with the Commitment Fee Payment, the
“March 31st
Payments”). The Default Letter states that pursuant to Section
7(a)(iii) of the Credit Agreement, additional events of default will occur under
the Credit Agreement unless (i) the LIBOR Payment is made on or before April 2,
2009; and (ii) the March 31st
Payments are made on or before April 3, 2009. Section 7.1(a)(iii) of
the Credit Agreement provides, in relevant part, that an event of default exists
if the Company fails to pay any interest on any loan or any fee or other amount
payable under the Credit Agreement when due in accordance with the terms of the
Credit Agreement and such failure continues unremedied for three (3)
days. The Company did not make these payments before April 3,
2009.
The
Credit Facility consists of a $225 million seven-year term loan ("Term Loan"),
and a $20 million five-year revolving credit facility ("Revolving Credit
Facility") under which the Company can obtain extensions of credit in the form
of cash loans or standby letters of credit. At the time of the
Notice, the outstanding balance on the Term Loan was $225.0 million and the
outstanding balance on the Revolving Credit Facility was $2.5
million. The Administrative Agent has informed the Company that as a
result of the Specified Events of Default, all amounts owing under the Credit
Agreement hereafter bear interest, payable on demand, at a rate equal to: (i) in
the case of principal, 2% above the otherwise applicable rate; and (ii) in the
case of interest, fees and other amounts, the ABR Default Rate (as defined in
the Credit Agreement), which as of April 1, 2009 was 6.25%. The
Default Letter further states that at this time, no Swingline Loans or
additional Revolving Loans are available to the Company.
Swap
Agreement
The
Company received a Notice of Event of Default and Reservation of Rights (the
“Default Notice”) dated April 1, 2009, from Wachovia in connection with an
alleged event of default under the ISDA Master Agreement, dated as of May 31,
2007 (as amended, modified, waived, supplemented, extended, restated or replaced
from time to time) between Wachovia and the Company (the “Swap
Agreement”).
The
Default Notice alleges that (a) an event of default exists pursuant to Section
5(a)(vi)(i) of the Swap Agreement arising from the occurrence of an event of
default(s) under the Credit Agreement and (b) that the Company failed to make
payments totaling $2,149,614.88 to Wachovia with respect to one or more
transactions under the Swap Agreement. The Default Notice states the
Company’s failure to pay this overdue amount on or before the third local
business day after receipt of the Default Notice will constitute an event of
default under Section 5(a)(i) of the Swap Agreement. The Company did
not pay the overdue amount within the three-day grace period.
As
previously announced by the Company, any default under the Swap Agreement
automatically results
in an additional default interest of 1% on any overdue amounts under the Swap
Agreement. This default rate is in addition to the interest rate that
would otherwise be applicable under the Swap Agreement. As of
December 31, 2008, the amount outstanding under the Swap Agreement was
$30.2 million.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
April 6, 2009
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RIVIERA
HOLDINGS CORPORATION
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By:
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Phillip
B. Simons
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Treasurer
and Chief Financial Officer
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