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Sources Expect No Late Offers for Bankrupt Aladdin Hotel

LAS VEGAS -- Don't count on a last-minute cash offer surfacing for the bankrupt Aladdin, informed sources said this week.

Potential bidders hoping to top Planet Hollywood Chairman Robert Earl's $635 million offer of debt restructuring and cash must have their offers qualified by June 17.

If a qualified bidder emerges, a purchaser selection hearing would take place June 20, with the U.S. Bankruptcy Court holding an auction for competing bids.

Sources involved in the Aladdin bankruptcy sales process said the megaresort's secured creditors, owed about $575 million, aren't eager to accept a lowball cash offer for the property.

The banks and GECC, the property's slot and furniture lessor, don't want to have to write off a portion of their Aladdin loan portfolios as losses, executives said.

Instead the creditors prefer a buyer willing to assume Aladdin's debt at its face value and also invest enough money to fix problems that contribute to the resort's sluggish performance.

"All of these banks could get 83 cents to 85 cents on the dollar right now (on their $510 million in Aladdin long-term debt) if they wanted to," Earl said Thursday. "But they don't want to. In the investment community there are some companies that can't afford to take discounts, because they'd have to book a loss."

Planet Hollywood's bid includes $90 million in cash contributed by Starwood Hotels and Resorts Worldwide, Bay Harbour Management and Earl. The group would use the cash to rename, retheme and fix the megaresort. The offer also includes $35 million from the Aladdin's power supplier, Northwind Aladdin.

Pinnacle Entertainment late last year dropped its plan to bid for the Aladdin. That bid too would have restructured the resort's debt.

Pinnacle Chairman Dan Lee said bankruptcy sales usually take one of two different courses.

"One would be a complete sale of the company assets, like the (former) Regent Las Vegas," said Lee, whose Las Vegas-based company operates the Boomtown hotel-casino near Reno as well as six casinos in Argentina, Louisiana, Mississippi and Indiana. "A sale provides the most opportunity to turn around a property."

Lee noted that the Regent sold for $80 million in cash, well below the $366 million in debt then-owner Swiss Casinos ran up before the property was sold.

That sales method often gives the buyer an opportunity to make a healthy return, but it also forces creditors to acknowledge the loss that comes from accepting much less than the face value of their debt, he said.

"The other course, the one the Aladdin seems likely to follow, is to sell the property for restructured debt," Lee said. "Not that much changes, and some companies are unable to (turn the business around)."

Earl and Lee agreed that major Strip operators Park Place Entertainment, Harrah's Entertainment, MGM Mirage and Mandalay Resort Group are unlikely to make a last-minute bid for the company, even though they'd all likely be able to raise the cash to buy it.

Spokesmen for at least three of the operators have said their companies are unlikely to bid on the project.

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