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Rod Smith

Aladdin Sale Back on Track

26 August 2004

LAS VEGAS -- The sale of the $1.4 billion Aladdin hotel-casino is back on track since Nevada investigators were given access to audit documents dealing with some of the buyers' investments, Gaming Control Board Chairman Dennis Neilander said Wednesday.

Licenses for a Planet Hollywood-led investment group are expected to be approved by the Gaming Commission at a hearing in Carson City today and the deal is expected to close Sept. 1, with the hotel-casino reopening the same day or shortly after that.

The investor group, led Planet Hollywood Chairman Robert Earl and Bay Harbour managing principal Douglas Teitelbaum, plans to turn the bankrupt Aladdin into the first Planet Hollywood hotel-casino.

The group won preliminary license approval early this month from the state Gaming Control Board.

However, control board members expressed concern that the Deloitte & Touche accounting firm refused to give Nevada investigators "work papers" used in auditing Bay Harbour's investments.

Deloitte & Touche told the Planet Hollywood group it would not release the material without the signed approval of every Bay Harbour investor.

Earl's Las Vegas attorney, Frank Schreck, said if there was "anything nefarious" in the work papers, then it would have been included in the company's audit reports.

However, the board made it clear two weeks ago that the Gaming Commission would not be able to proceed today without access to the "work papers."

Neilander said that although copies of the "work papers" have not been sent to the board, investigators he sent to New York were given complete access to the Planet Hollywood group's documents.

"It shouldn't be a stumbling block (to consideration)," although the specific findings of the investigators had not been reviewed as of Wednesday afternoon, he said.

University of Nevada, Las Vegas professor and casino industry expert Bill Thompson said it is important to Las Vegas for regulators to move forward on the Planet Hollywood license applications because of the business the new property should be able to attract to Las Vegas under its new brand name.

"The Aladdin is a well-situated property and it should have a strong identity with the new identity, owners and operators," he said.

Planet Hollywood, Bay Harbour Management and Starwood Hotels & Resorts will operate the Strip resort. They bought the troubled hotel last year in bankruptcy court, pending licensing approval.

"The Aladdin is a name that never caught on. Planet Hollywood is a world-known brand, and the owners, despite previous bankruptcies, have deep pockets. It has a tremendous potential and should get off to a strong start," Thompson said.

Earl's group plans to spend $100 million next year renovating gaming and shopping areas in the 2,567 room hotel-casino. The Planet Hollywood facade probably will not be completed before early in 2006.

Neither Earl nor Teitelbaum will have a role in day-to-day operations. The hotel will be run by Starwood, which operates more than 700 hotels, as a Sheraton hotel.

OpBiz, the name the Planet Hollywood group used to front its offer to buy Aladdin, won the right at auction last June to buy the property for $635 million.

U.S. Bankruptcy Judge Clive Jones in August confirmed the Aladdin's reorganization plan, clearing the way for the group to take over the property in August or September.

Aladdin bosses filed for bankruptcy protection from creditors in September 2001, after opening in August 2000. Executives blamed its misfortunes on slow initial business that was compounded by the dramatic tourism slowdown that followed the Sept. 11, 2001, terrorist attacks.

Meanwhile, documents filed with the bankruptcy court showed the Aladdin turned a profit of $3 million in July, although it has lost $96.3 million since filing for bankruptcy protection three years ago.

Earlier this month, Earl told the Control Board he expects $276 million in revenue in the first year under the new ownership group, with cash flow of $43.1 million.

He said revenues should increase to $434 million and cash flow to $121.4 million by 2009.