Well folks, it looks like Reno is officially dead. Last I saw it in 2010, it was a ghost town compared to the Reno I knew in the late 90s (ah, good times) so it's no surprise to hear Silver Legacy auditors at Deloitte have some concerns about the Silver Legacy's long-term financial health.
On February 6, 2012, Circus and Eldorado Joint Venture (the “Partnership”) updated its consolidated financial statements as of December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010 (the “Consolidated Financial Statements”) to include a new footnote 2 expressing substantial doubt as to the Partnership’s ability to continue as a going concern, and Deloitte & Touche LLP, the Partnership’s independent registered public accounting firm, reissued its report and included an explanatory paragraph related to the Partnership’s ability to continue as a going concern. A copy of the reissued report and the Consolidated Financial Statements is being furnished as Exhibit 99.1 hereto and is hereby incorporated by reference to this Item 8.01.
This was identified way back in the December 31, 2010 10-K so it's not like the Partnership didn't see this coming.
We must refinance our 10 1 / 8 % mortgage notes by March 1, 2012. Our 10 1 / 8 % mortgage notes mature on March 1, 2012. We are exploring various alternatives for refinancing our obligations under the 10 1 / 8 % mortgage notes. There can be no assurance, however, that we will be able to refinance the mortgage notes on terms that are acceptable to us, or at all. If we are unable to refinance our obligations with respect to the mortgage notes, the holders thereof will be entitled to exercise the remedies provided in the indenture governing the notes, including foreclosing on the assets securing the mortgage notes. If we are unable to refinance the notes by March 1, 2012, it would have a material adverse effect on our business and our financial position. Moreover, amounts outstanding under our notes will be classified as “current obligations” for financial reporting purposes beginning March 31, 2011. In the event that we are unable to refinance such amounts by the time of the filing of our Annual Report on Form 10-K for the year ending December 31, 2011, it would affect our independent registered public accounting firm’s assessment of our ability to continue as a going concern, would have a material adverse effect on our consolidated financial position and would raise substantial doubt as to our ability to continue as a going concern.
Unless the Silver Legacy can come up with $142.8 million or a sweet low interest deal on those mortgage notes, it looks like Reno might lose another downtown institution. If you recall, Fitzgerald's was closed in November of 2008 and the "boutique hotel" planned to take its place ended up in an FDIC auction after Chicago's Corus Bank failed in September of 2009.
What will happen to all those weekending San Franciscans?!