Moody's downgrades Riviera

Moody's Investors Service said it downgraded Riviera Holding Corp.'s corporate family and probability-of-default ratings to B3 from B2, $225 million term loan to B3 (LGD3, 48%) from B2 (LGD4, 51%) and $20 million revolving credit to B3 (LGD3, 48%) from B2 (LGD4, 51%).

The outlook is negative.

The downgrade reflects Riviera's greater-than-anticipated decline in earnings, increasing leverage, eroding cash balance and loss of access to remaining availability under its $20 million revolving credit facility, the agency said.

Debt-to-EBITDA ratio rose to 7.3 times and could increase given the weak outlook for gaming demand in Las Vegas, the agency noted.

Despite this high leverage, the B3 corporate family rating anticipates that Riviera will be able to cover interest payments and capital expenditures through 2009 with a combination of internally generated cash flow and unrestricted cash balances, Moody's said.

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