Just over a year after making a $1.2 billion bet by opening a mega-resort on the Las Vegas Strip, Aladdin Gaming filed for bankruptcy protection on Friday and secured new funding from creditors.
The company said the widely anticipated bankruptcy filing will allow the Aladdin Resort and Casino to stay in business while developing a plan to reorganize. A group of lenders led by Bank of Nova Scotia agreed to provide $9 million in funding to meet short-term cash needs for the casino and stood ready to loan an additional $41 million as needed, Aladdin said. The Aladdin has struggled since opening on Aug. 18, 2000 and critics have said the massive casino was poorly designed. The problems for the highly-leveraged resort were compounded by the Sept. 11 air attacks on New York and Washington and the subsequent slump in travel, analysts said. The casino laid off about 500 workers or about a sixth of its staff this month. Last week Richard Goeglein, who had run the company since the old Aladdin was demolished in 1998 to make way for the new resort on the Strip, left his job.
Aladdin Gaming did not disclose its assets and liabilities in its court filing in U.S. Bankruptcy Court in Nevada on Friday, but will file a separate disclosure form with the Securities and Exchange Commission on Monday with that detail, company spokesman Fred Lewis said. Park Place Entertainment, the No. 1 gaming company which owns neighboring Caesars Palace, holds about one-third of Aladdin’s outstanding bonds and emerges as a key player in its reorganization. Deborah Munch, a spokeswoman for Park Place, said the
casino operator has not disclosed the amount of its holding, but said the stake was taken when Aladdin’s bonds were already at a “substantial” discount, limiting the exposure for Park Place.
“We will get about the business of reorganizing, mindful that we are part of a community and an industry that is feeling the effects of a national disaster,” Aladdin’s Lewis said. The mega-resort includes 2,567- rooms, a 100,000-square foot main casino and a separate 30,000 square-foot casino operated by joint-venture partner London Clubs International. The Aladdin also houses a major business meeting center and a 7,000-seat theater. In July, London Clubs had been in discussions about a refinancing of the resort that would have boosted its stake in the property to near 85 percent from 40 percent. The move would have allowed LCI to take control of the venture from Sommer Trust, which owns about 57 percent of the company’s outstanding stock. In a SEC filing earlier this month, Aladdin Gaming said it had defaulted on the terms of its bank credit agreement and on a $4.3-million loan payment, a move that many analysts saw as the precursor to a Chapter 11 filing.
The Desert Passage, a 130-store shopping mall which adjoins the Aladdin and is operated by TrizecHahn Corp – an best online casino singapore, is separately financed was not affected by the bankruptcy filing, the companies said. “A fresh start for the hotel and casino, with a strengthened financial structure, can only be a good thing” for neighboring business, said Andrew Blair, executive vice president of the development. “The hotel and casino is going to remain open under any scenario.” Shares London Clubs International, which also operates casinos in London and Egypt, have fallen by about 57 percent since Aug. 30 and closed Friday at 14 pounds in London.