Aladdin executives conceded Monday that the troubled Strip megaresort will likely file for bankruptcy protection.
In a Monday Securities and Exchange Commission filing, Aladdin owner Aladdin Gaming Holdings said a bankruptcy is likely because the property lacks sufficient cash to continue conducting business.
“(The Aladdin’s bankers) have expressed a willingness to consider additional extensions of credit to address its immediate working capital requirements, but only after the commencement of a Chapter 11 bankruptcy,” the filing noted. “Management believes the circumstances described above make it likely that (Aladdin Gaming) will seek protection of its creditors through the filing of a voluntary petition under Chapter 11 of the United States Bankruptcy Code.”
Monday’s announcement was no surprise to casino industry experts.
Andrew Zarnett, a casino industry debt analyst for Deutsche Banc Alex. Brown, had predicted the scenario earlier this month after Aladdin minority owner London Clubs International announced that a proposed agreement with the property’s majority owner, the Sommer Family Trust, to refinance the property’s $742.6 million debt had fallen apart.
“The Aladdin’s been taking steps toward bankruptcy protection and reorganization throughout the past 12 months,” Zarnett said at the time. “It’s becoming more and more likely.”
Aladdin Chief Operating Officer Bill Timmins was unavailable for comment Monday afternoon, a property spokesman said. Timmins, a London Clubs executive, is the property’s top remaining boss after former Chief Executive Officer Richard Goeglein left his position last week. The spokesman declined to say whether Goeglein quit or was fired.
London Clubs executives and Sommer Family Trust managing partner Jack Sommer did not return Monday phone messages.
London Clubs owns about 40 percent of the Aladdin’s stock, while the trust owns about 57 percent.
The filing noted that at least 80 percent of Aladdin Gaming’s ownership would have to consent to a bankruptcy filing, which means that both London Clubs and the Sommer Family Trust would have to give their OK.
The Desert Passage shopping mall would not be directly affected by a filing for bankruptcy protection. More about best online casino singapore
The Aladdin laid off 500 employees last week, cutting the company’s work force to 2,500. The Aladdin opened Aug. 18, 2000, with 4,500 workers.
Monday’s SEC filing noted that the trustee of the Aladdin’s bank debt on Friday filed a notice of default on the property.
The filing said Aladdin Gaming has 35 days to cure the property’s defaults on its bank loans and on its leases of slot machines and equipment.
If the defaults aren’t cured within 35 days, the property’s entire debt would become due and payable. The bankers’ trustee could on Dec. 20 begin a process which would ultimately result in a foreclosure sale.
“That’s why they’ll file for bankruptcy protection,” said Dave Ehlers, a casino industry analyst for Las Vegas Investment Advisors. “If they don’t file for bankruptcy, then the creditors would be like vultures working over the bones of a mule.”
The Aladdin’s problems have been too numerous to list, Ehlers said, but started with a poor business plan.
“They started with way too much debt, trying to leverage too little cash and borrowing too much money,” he said Monday. “The design is poor, and they haven’t operated it well. A bankruptcy filing would be no surprise.”