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Aladdin Files for Chapter 11 Bankruptcy Protection

LAS VEGAS — Operators of the 13-month-old Aladdin filed for Chapter 11 bankruptcy protection today, paving the way for the struggling megaresort to remain open as Aladdin Gaming executives negotiate with their creditors to reorganize the property's debt of about $500 million.

Chapter 11 is the most common form of bankruptcy protection, freeing a company from the threat of creditors' lawsuits while it reorganizes its finances and continues to operate.

An Aladdin spokesman declined to comment about the filing.

Sources familiar with the move say it will help the troubled megaresort, giving its operators some financial breathing room as they attempt to fix its problems.

Critics have argued that the new Aladdin is plagued by a poor design that limits foot traffic throughout the property, has a hidden auto entrance from Harmon Avenue and a limited customer database.

They say London Clubs International, operator of the Aladdin's high-end casino area, has little grasp of the Las Vegas high-roller market.

Throughout much of August, representatives of the megaresort's majority owners, the Sommer Family Trust and London Clubs, attempted to reach an agreement that would give the British company a controlling interest in the property.

Aladdin Gaming missed an estimated $8 million payment due Aug. 28. That payment had been postponed on several occasions, beginning in May, as Aladdin's owners negotiated with their financiers.

The company also defaulted on a $4.3 million payment for financing to lease furniture, fixtures and equipment and had until today to resolve the default with General Electric Capital Corp. The bankruptcy filing prevents GE Capital from seizing the Aladdin’s gaming equipment.

The expected filing was signaled last week with the layoff of 500 workers and the Sept. 21 departure of Aladdin Gaming Chief Executive Officer Richard Goeglein, who either quit or was fired from his job, after heading the $1.05 billion hotel-casino since 1998.

Aladdin Gaming Chief Operating Officer Bill Timmins was named to temporarily head the megaresort, and no permanent replacement was named.

The south Strip property opened in August 2000, replacing a 32-year-old hotel-casino of the same name that had been imploded.

Wall Street sources say financiers prefer a London Clubs-controlled regime to a Sommer-led operation, believing the Sommer family is split over the investment in the Aladdin and has little interest in sinking more money into the property.

They also believe it would be easier to operate or sell the megaresort if it were owned by one entity.

But the talks between the two sides dissolved, with family trust managing partner Jack Sommer apparently seeking concessions for his interest that London Clubs was unwilling to grant, sources said.

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