NEW YORK (The Deal) -- The owner and operator of the Hard Rock Hotel & Casino Las Vegas has until June 2 under a forbearance agreement to make up the interest that it owes to its lender, but filings suggest that even then the company won't be able to pay it.
BREF HR, which was formed by affiliates of property, power and infrastructure asset manager Brookfield Asset Management in 2011 in order to take over ownership of the hotel and casino through a transaction in lieu of a foreclosure, owes $44.3 million in pay-in-kind interest to its lender, Vegas HR Private Ltd., on roughly $902.5 million in debt due March 1, 2018, and priced at Libor plus 250 basis points with a 1.5% floor on Libor.
The PIK interest was due on March 1, but the company failed to pay it then. Vegas HR agreed to give BREF more time through a forbearance agreement that expires on June 2.
"Currently, the company does not have sufficient funds to satisfy a demand for the PIK interest payment on June 2, 2014," it said in its annual report filed with the SEC on May 9.
There is also supplemental interest on the $902.5 million equal to the greater of 6.5% or Libor plus 400 basis points. The $61.2 million in outstanding supplemental interest loan can be paid-in-kind, too, according to filings with the Securities and Exchange Commission said. This supplemental interest appears to be separate from the $44.3 million PIK interest.
According to the financial report, the company is currently assessing its options to satisfy the $44.3 million PIK interest payment obligation, including negotiating a waiver of the requirement from the lender, selling off a portion of existing collateral or attempting to obtain borrowings from other sources.
BREF warned in the filing that if it's unable to restructure its debt or find alternative financing, "we risk losing some or all of our property to foreclosure." BREF in the annual report raised substantial doubt about its ability to continue as a going concern, citing years of losses and its June 2 deadline to pay the PIK interest. If the company fails to pay the PIK interest by the deadline, the lender could declare all of its debt due.