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Aladdin Gaming Advertises for 4,500 Employees

by Gary Thompson

Aladdin Gaming is now advertising for 4,500 full- and part-time workers and is talking with four potential partners for Phase II, which would be called the Aladdin Music Project.

Aladdin President Richard Goeglein described two possible partners as "major convention-type companies that have shown serious interest."

"The quality of the potential partners has improved dramatically as construction has progressed," he said. Planet Hollywood, which was originally scheduled to operate the Music Project, fell on financial hard times, and early would-be successors included some promoters who didn't bring any added value to the deal, he said.

Aladdin Gaming is 72 percent owned by a trust controlled by real estate developer Jack Sommer, while United Kingdom casino operator London Clubs International (LCI) owns 25 percent. Goeglein owns the remainder.

The completion guarantee between the Sommer trust and LCI includes a contribution agreement that calls for the parties to be responsible for a pro rata share of any additional equity contribution needed to cover construction costs increases, Klerk said.

Through 1999's third quarter, LCI had funded more than 90 percent of $52 million in added costs. The funding included a loan to Sommer to cover the trust's share of the costs; the loan is convertible to an additional 15 percentage points of equity for LCI, which would raise its stake to 40 percent should it opt to do so.

All partners are enthusiastic about the growth in Las Vegas visitor volume -- expected to top 35 million people this year -- stimulated by the new resorts that have opened over the past 15 months.

"Our assumption going in was that the market would continue to grow and that the additional capacity from the new resorts would be absorbed," Goeglein said. "The demand side of the market is much bigger than it used to be.

"And if you exclude Canada, foreign visitors account for about 6 percent of the market. We've never worked very had to attract that market, and believe there's a very large opportunity to ratchet up visitation from the United Kingdom and Europe as the global economy improves."

In a recent research report, the two Morgan Stanley analysts cited several reasons for their optimism about the project.

"LCI has demonstrated its commitment to the project ... (and stated) its willingness to inject more capital if necessary," they wrote.

"We think the bonds could trade up when the property opens. Much of the speculation surrounding the credit has been about whether construction would be completed without restructuring."

They noted that new properties have typically fared well and said the Aladdin concept should draw new Las Vegas visitors.

"The Aladdin design is well thought out, from a hotelier's standpoint," the analysts said. And as the last of the new wave of properties opening on the Strip, "it will not have to face new competition right after opening and will be able to ride the marketing coattails of its predecessors."

They added that the Aladdin management team has more than 50 years of experience in the lodging and gaming industries and said the property "could be an attractive acquisition candidate for a larger casino company looking for more growth on the Strip."

Lawrence Klatzkin of Jefferies & Co. said the senior discount notes, which were recently quoted at 43 bid, 44 asked, have an accreted value in the 60s now and afford a good speculative investment opportunity.

Aladdin sold $221.5 million par value of 13.5 percent notes at a little over 50 percent of par, raising $115 million as part of its construction budget. The notes are subordinate to a $490 million bank credit facility.

Interest accrues until the notes reach par value on March 1, 2003, and then continues at 13.5 percent until maturity seven years later. The notes are callable on March 1, 2003, at 106.73 and each year thereafter at a declining price until March 2006.

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