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Aladdin For Sale

LAS VEGAS – Nov. 29, 2001 --The bankrupt Aladdin's lenders expect the property to be sold as soon as May, and are evaluating whether a direct sale or an auction would be the best way to market the troubled Strip megaresort, a knowledgeable source said Thursday.

The Aladdin lost $2.6 million in October, but that was a substantial improvement over the $24 million loss the property reported in September, according to a recent U.S. Bankruptcy Court filing.

The $1.05 billion property's failure to generate enough cash flow to make timely payments on its $561 million debt forced the Aladdin to file for Chapter 11 bankruptcy protection Sept. 28.

A U.S. Bankruptcy Court document filed Nov. 16 by Aladdin lawyers noted that "the intent of the lenders is to cause an orderly sale of the Aladdin Hotel and Casino within the time frame of six to 12 months."

Two casino industry analysts said Thursday they believe the Aladdin will eventually sell for about $400 million.

The difficult travel and tourism market makes an Aladdin sale more difficult, Bear, Stearns & Co.'s Jason Kroll said.

Kroll estimated a sales price range of $300 million to $500 million, but predicted bidders likely will wait until market conditions improve.

"I don't see anyone wanting to step up right now, but Park Place, MGM Mirage and Harrah's might consider it at the right price," Kroll said.

Deutsche Banc Alex. Brown analyst Andrew Zarnett likewise forecast a wide range when evaluating a sales price for the Aladdin.

He predicted one of the four largest casino operators would buy the property, adding Mandalay Resort Group to the three companies cited by Kroll.

"It will probably sell for somewhere around $400 million," Zarnett said. "Clearly, in this environment, nobody's in a hurry. The overall fundamentals of the industry are weak, but they're getting better every day."

A six- to 12-month timetable for a sale is reasonable, Zarnett said.

Aladdin executives declined to comment, a property spokesman said Thursday.

Meantime, Aladdin executives reached a deal last week cutting by more than half the property's payments to the companies that lease much of its equipment and furniture, the leasing companies' lawyer said Thursday.

General Electric Capital Corp. and GMAC are owed about $72 million for the leases and for a loan made against the Aladdin's slot machines. The Aladdin missed a scheduled $4.25 million payment to the companies in September.

The deal reduces on an interim basis the payments the Aladdin owes the leasing companies in order to stabilize the property's cash flow, GECC lawyer Candace Carlyon said.

The missed September payment was put on hold, and the property will now make monthly payments to the leasing companies rather than the quarterly $4.25 million payments formerly required.

Instead, the deal compels the Aladdin to make $200,000 monthly payments for October and November, with $625,000 monthly payments beginning in December.

September's unpaid payment will accrue interest, Carlyon said.

"Both parties recognized the Aladdin needed a little breathing room," she said.

The Aladdin got an OK two weeks ago from Bankruptcy Judge Clive Jones on a $50 million loan from the property's bankers.

The loan was intended to keep the megaresort open while its executives and its lenders decide whether to sell the property, refinance it by soliciting new investors, or reorganize it by giving Aladdin creditors an equity stake in its operations.

The bankers, fronted by the Bank of Nova Scotia, are already owed about $435 million by the Aladdin and have a deed of trust on the property as collateral for their original loans.

The Bank of Nova Scotia provided $15 million of the $50 million post-bankruptcy filing loan, with two Van Kampen trusts also providing $15 million.

The Jackson National Life Insurance Co., the Pilgrim Trust and Merrill Lynch each provided $5 million, with the OCM Real Estate Opportunities Fund and Foothill Capital Corp. each contributing $2.5 million to the loan.

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