CasinoCityTimes.com

Gurus
News
Newsletter
Search News Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!

Gaming News

 

Aladdin Bankruptcy Issues Move Closer to Resolution

1 July 2002

by Richard N. Velotta

LAS VEGAS -- The resolution of three key issues in U.S. Bankruptcy Court could speed the sale of the Aladdin hotel-casino in the weeks ahead.

A team of attorneys representing the 2,567-room resort -- which opened on the Las Vegas Strip in August 2000 but filed for Chapter 11 bankruptcy protection just over a year later -- is working to clear a path for the sale.

"Each time you deal with a problem, the process gets a little easier," said William Noall, who represents the Aladdin in proceedings before Judge Robert C. Jones.

As each issue is resolved, it will become easier for Jeff Truitt of the KPMG accounting firm in Los Angeles to market the property to potential bidders. Last week, the sale procedure was set in motion when Truitt was appointed as the point man for the transaction.

Truitt could not be reached for comment on plans to market the property.

Noall said the sale has been taken off the court's calendar and won't be brought to Jones again until a deal is on the table.

In the meantime, the other issues are getting closer to resolution:

Attorneys are preparing an order following a hearing at which Jones ruled on a complex agreement between Aladdin Gaming LLC and Trizec Properties' Aladdin Bazaar LLC, operator of the big Desert Passage shopping mall at the resort.

"The agreements are very complex," Jones said in a recent hearing. "I attribute this default here and the problem here primarily to the Sommer's trust side and the debtor's side, (Aladdin) Gaming side."

The judge was referring to the hotel-casino bankruptcy and that the Sommer Family Trust was primarily responsible for intricate agreements on facilities jointly used by the hotel and the shopping mall.

At issue are which companies are responsible to pay for expenses on facilities that are jointly used by the hotel and the shopping mall. The Sommer family partnered with London Clubs International on the Aladdin's casino operation and Trizec, Toronto, on the mall.

But both the mall owners and the casino owners are responsible for upkeep, insurance and security on the resort's attached parking garage as well as paying off the debt on it. Both sides also jointly operate valet parking services.

Jones is expected to sign an order within days spelling out which side is responsible for millions of dollars in expenses on several contracts. The order should clarify what ongoing expenses are the casino's responsibility.

A tentative settlement has been reached on a pending complaint involving Showclubs of America Inc., which had planned to invest $12 million to $14 million to build a combination nightclub and 1,200-seat showroom to house a show starring actress Carmen Electra.

An attorney representing the Aladdin said a settlement framework has been drafted, but it still needs the approval of the company's board of directors and lenders. Under terms of the settlement, Showclubs would relinquish its claim and no longer seek possession of the showroom.

Under an earlier lease agreement Showclubs signed with the Aladdin, show producers were to have secured financing by early September and begun construction in early October. Showclubs said it was delayed by matters relating to the Sept. 11 terrorist attacks and that those drastic events gave the company the right to begin construction at a later date. The Aladdin maintained that the financing deadline was days before Sept. 11.

It is unclear whether Electra, whose show was to have been called "Lumiere," is continuing plans to appear onstage in Las Vegas. Showclubs attorneys could not be reached for comment. The Aladdin recently opened a different nightclub venue, Curve.

A hearing is scheduled next week on a dispute between the hotel-casino and Northwind Aladdin, which operates a $40 million utility plant that provides heated and chilled water for the resort. Both sides have sued each other over who owns the plant.

The Aladdin says Northwind's claims should be treated as outside financing, allowing the hotel to sell the plant along with the casino. But Northwind, financed by outside investors, says the plant is its property and that the company would be entitled to full recovery of its claims from the sale of the resort.

Jones has said that he isn't convinced a buyer would want to acquire the Aladdin until the lawsuit is resolved.

Noall has said that "several interested parties" have been looking at the $1.2 billion resort but that confidentiality agreements prohibited him from listing potential suitors.

Sources familiar with the process said last week that Colony Capital LLC, Los Angeles, a real estate investment firm that at one time owned Harveys Casino Resorts, is still interested in acquiring the Aladdin, as is Pinnacle Entertainment Inc., Glendale, Calif., which owns and operates seven casinos in Nevada, Mississippi, Louisiana, Indiana and Argentina.

Las Vegas-based Park Place Entertainment Corp., which owns and operates the nearby Paris and Bally's hotel-casino properties, has been silent about entering the bidding, despite being identified early in the process as a possible suitor.

Stratosphere and Arizona Charlies' hotel-casino owner Carl Icahn also has been speculated as a bidder, but gaming analyst Andrew Zarnett of Deutsche Bank Securities said he did not think Icahn would enter the fray.

"There are a variety of real estate guys looking at it," Zarnett said. "Everybody always mentions Icahn, but based on his history, I think it (Aladdin) is too big and not cheap enough for him."

Colony Capital had a reported offer of $375 million to $500 million, which would leave little money to pay many of the Aladdin's creditors after major secured creditors are paid. General Electric Capital Corp., the property's second largest creditor with a $70 million claim for slot machine and equipment loans, said the reported price would not be high enough to protect its investment.

The Aladdin's banks are owed $437.5 million, which would have to be paid before other creditors' claims could be addressed.

< Gaming News