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Gaming Guru

Tim O'Reiley

Las Vegas Monorail gets OK to exit bankruptcy

10 May 2012

The Las Vegas Monorail Corp. on Wednesday received a green light to exit Chapter 11 proceedings as U.S. Bankruptcy Court Judge Bruce Markell found that its reorganization plan had a good chance of working.

In November, Markell shot down the previous edition after deciding that it was based on what amounted to wishful thinking, including unproven ridership projections plus too little cash flow to pay off debt and the cost of equipment upgrades and replacements.

As a result, the monorail, a nonprofit company, negotiated a new deal with its lenders to reduce the post-bankruptcy debt from $40.4 million at 9.55 percent interest to $13 million at 5.5 percent. In addition, it scaled back its spending needs over the next several years.

The final result satisfied the bankruptcy law section that a Chapter 11 debtor must devise a plan to solve financial problems, not just postpone them and set up another failure.

"Under that provision, what matters is that the monorail produces more cash than it consumes and that the [monorail] has shown that it is more likely than not that it will continue to do so for the foreseeable future," Markell wrote. The monorail succeeded this time, he added.

The ruling technically does not finish the case, but clears the only hurdle remaining.

"The Las Vegas Monorail has carried well over 50 million rides and will continue providing another transportation option, contributing to reduced congestion and improved air quality in Southern Nevada," said general manager Curtis Myles, in a statement.

However, problems still loom outside of court. During the first quarter, the monorail carried 994,000 passengers, the first time a quarterly total has ever fallen below 1 million. This marked a 23.9 percent decrease from last year, which was helped by a major convention, and 20.4 percent from 2010.

The first-quarter revenue of $4.6 million declined at nearly identical rates from the past two years.

Markell also took note of the ongoing controversy that has surrounded the monorail.

"Invective tended to overshadow the fact that, as much as the monorail may be a lightning rod for those who think it represents the worst of government and bureaucracy - a sort of glaring example of nonsense on stilts - it is still a significant financial and physical presence in Las Vegas," he wrote.

But neither that, nor the possibility of better alternatives, mattered in bankruptcy, he wrote.