Aladdin still in talks on debt
By the end of today, the Aladdin resort on the Las Vegas Strip
could be in default on $700 million in debt. It could also be saved from
bankruptcy until at least September 2002.
But, as of this morning, there wasn't any word on which fate the
$1.2 billion resort faces.
In a quarterly report filed two weeks ago, the Aladdin said it
had negotiated a key amendment to its credit agreements with its lead banker,
the Bank of Nova Scotia. The agreement would defer principal payments on the
Aladdin's bank debt until next September, lowering the Aladdin's debt payments
by nearly $18 million over this period .sbobet That would likely be enough to keep the
property solvent for at least another year.
But the Aladdin didn't have the approval of all of its lenders at
that time. And it still doesn't, an Aladdin spokesman said today.
"We're in ongoing discussions with all interested
parties," said Aladdin spokesman Lynn Holt. These parties include London
Clubs International and the Sommer Trust -- the property's two equity owners --
and all financing syndicates, Holt said.
Time is running short. The Aladdin's quarterly report stated the
new credit agreement must take effect by the end of today, or LCI and Sommer
will be required to immediately invest $8 million in the Aladdin.
Those funds won't be supplied by the Sommer Trust, "which
does not now have sufficient liquidity" to give the Aladdin any money, the
report said.
LCI invested $7.1 million in the property on Aug. 2. But unless
the Aladdin's new credit agreement goes into effect, LCI said its bankers will
not finance any more payments to the Aladdin.
If the credit agreement doesn't go into effect by the end of
today -- and if LCI and Sommer failed to invest the required $8 million -- the
Aladdin would be in default on its bank debt, the Aladdin's quarterly report
said.
If default occurs, the Aladdin's bankers would have the option of
immediately calling in all loans and foreclosing on the resort. In such a
situation, "(Aladdin) likely would seek protection from its creditors
under Chapter 11 of the United States Bankruptcy Code," the Aladdin's
quarterly report said.
But these are options, not requirements.
"That doesn't mean they can't extend the deadline,"
said Deutsche Banc Alex. Brown gaming analyst Andrew Zarnett. "They've
done it before."
Zarnett said the bankers' willingness to give the Aladdin more
time will hinge on how the property is performing financially. The Aladdin had
a disappointing second quarter, but if its fundamentals are improving, the
bankers are more likely to cut the Aladdin some slack.
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