Las Vegas Sun

September 21, 2019

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Planet Hollywood’s financial outlook worsens

Resort says lenders control its finances as property reports $17.5 million loss

Planet Hollywood

Justin M. Bowen

The Planet Hollywood resort on the Las Vegas Strip.

The owner of the 2,518-room Planet Hollywood hotel-casino on Monday reported another quarterly loss and disclosed that its lenders are now in control of its finances.

BH/RE LLC, the Las Vegas Strip resort's parent company, said that for the quarter ended Sept. 30 it lost $17.5 million vs. a loss of $10.7 million in the year-ago quarter.

Revenue fell 20.6 percent, from $69 million to $55 million, as Planet Hollywood's casino accommodated fewer players and the hotel had to lower room rates to stay competitive as the recession reduced visitation to Las Vegas.

Even as the average daily room rate fell year-over-year from $123 to $99, hotel occupancy decreased 3.9 percentage points to 91.1 percent.

Compounding the problem, 14,748 more room nights were available during the 2009 quarter because of a room renovation project that was under way in the 2008 quarter.

With Harrah's Entertainment Inc. buying a reported $140 million of its debt during the quarter, raising speculation that Harrah's is interested in the property, Planet Hollywood reiterated that it has defaulted on its debt obligations totaling $870 million.

The default occurred on Sept. 9 when Planet Hollywood did not have sufficient cash available to make interest and reserve payments due that day on an $860 million mortgage, which has been syndicated and is serviced by KeyBank Real Estate Capital.

Because of the default, the resort and the lending group entered into a "protective advance agreement" that outlines conditions for the lenders to make cash advances to the resort so it can continue operating.

"The company is continuing discussions with the lender in this regard," BH/RE said Monday in its quarterly financial report.

"Under the terms of the loan agreement, all cash receipts are deposited into a cash management account under lender control which is used to fund reserves and operating expenses. In accordance with the terms of the protective advance agreement, operating funds are disbursed to the company at the lender's sole discretion," BH/RE said.

With entities controlling Planet Hollywood restricted from filing for bankruptcy, the company said it's "involved in discussions with the lender that could result in a foreclosure on the property and a transfer of the deed, a transfer of a portion of some or all of the current equity of the company or a modification to the loan."

"There can be no assurance that an agreement will be reached with the lender, that the lender will not exercise its rights to obtain ownership of the Planet Hollywood Resort, will agree to modify the loan agreement or will make adequate funds available under the protective advance agreement," BH/RE said.

With CityCenter set to open across the street, Planet Hollywood did not offer an optimistic outlook for the rest of the year.

"We believe that third quarter 2009 operating results were negatively impacted by the current market conditions and that we will continue to experience lower than historical hotel occupancy, room rates and casino volumes throughout 2009. As a result, we have increasingly focused on efficiency initiatives to control expenses and improve performance. We are continually reviewing the costs and marketing opportunities to ensure maximum operating performance in the face of the current economic conditions," the resort said.

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