Planet Hollywood Resort concerned about debt payments

Planet Hollywood Resort expressed concern today that the property may not be able to generate enough cash flow to fund its financial commitments that include monthly payments on its debt load.

  “Absent a capital contribution” from the property’s owners, or “an equity investment by third parties or a restructuring” of the debt, the owners “do not believe that cash generated from operations, cash held in reserve by the lenders under the loan agreement ... will be adequate to meet the anticipated working capital and debt service obligations” of Planet Hollywood Resort through December 31, according to a filing with the Securities and Exchange Commission.

The filing warned the property could default if ownership is unsuccessful in seeking a modification to its current loan agreement or securing additional capital investment.

  The 35-acre property on the Strip has $860 million loan, which was scheduled to mature Dec. 31, 2008. The owners already exercised the first of three one-year extension available on the loan.

  Planet Hollywood Resort posted a net loss of $13.6 million in the second quarter ended June 30 driven by sharp decreases in revenues for the second straight quarter and interest expense on its debt load.

The loss is a small improvement from the $14.3 million loss posted the same time last year.

The property posted a six-month loss of $27.6 million, down slightly from the $26.4 million loss posted in 2008. Revenues declined 16.1 percent to $60.6 million in the quarter from $72.2 million, and six-month revenues declined 19.5 percent to $117.7 million from $146.2 million.

Second-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, fell 47.8 percent, to $5.8 million from $11.1 million in 2008. Cash flow the first six months is down 56.4 percent, to $11.2 million from $25.7 million.

Casino revenues slipped 8.5 percent in the quarter, and are down 15.2 percent in 2009.

Second-quarter revenues for the 2,496-room hotel fell 24.8 percent as average daily room rates dropped to $96 from $136. Occupancy was down to 91.6 percent from 97 percent last year.

The Strip property held a job fair in late July to hire staff for the new 1,201-room PH Towers, which will open in November.

Planet Hollywood Resort is privately owned by restaurateur Robert Earl and private equity firm Bay Harbour Management. Hotel company Starwood Hotels & Resorts Worldwide owns 11.39 percent.

  Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.