LAS VEGAS – The troubled Aladdin hotel-casino filed for Chapter 11 bankruptcy protection Friday as creditors stood poised to seize its slot machines and other equipment.
The move allows the Las Vegas Strip's newest resort to remain open while management develops a reorganization plan, company officials said.
Aladdin Gaming LLC will receive $9 million in operating capital from the company's lending group through the Bank of Nova Scotia to meet its short-term cash flow needs, officials said.
The creditors also expressed to the court a willingness to lend up to an additional $41 million to maintain operations at the 2,567-room resort.
"Today's speedy and positive response by the court is a heartening move forward for Aladdin," said Aladdin spokesman Fred Lewis in a statement. "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. We will continue to work to attract guests to Las Vegas."
Aladdin Gaming executives will negotiate with creditors to reorganize the hotel-casino's debt, which has been placed as high $740 million. Court papers filed showed a debt of $593 million.
The $1.2 billion resort faced the possible loss of its slot machines and other equipment if it didn't file a bankruptcy petition by Friday, according to lenders who had not been paid.
The 13-month-old resort has been struggling, particularly in its casino, ever since its delayed opening, unable to produce enough cash flow to cover the interest payments on its mounting debt. Its daily win total in the quarter ending June 30 was $93 per slot machine, below the $125 average on the Las Vegas Strip and a far cry from the $140 per slot of Aladdin's neighboring casinos, analysts said.
London Clubs International, owner of 40 percent of the Aladdin's stock, kept the Aladdin afloat for its first year, investing millions of dollars into the property to cover shortages. But because of these investments and its share of the Aladdin's losses, the London casino operator has been weakened to a point it could become a takeover target, analysts say.
As a result, LCI's banks have refused to let the company invest any more cash in the Aladdin. And the Sommer Trust, the Aladdin's majority shareholder, has told Aladdin officials it does not have the liquidity to make any investments.
The resort defaulted on both its bank debt and its lease financing, and lenders had started to foreclose on the property.
The Aladdin said it no longer had the cash to even continue business operations.
About 2,600 people work at the Aladdin; 500 were laid off following a severe dip in Las Vegas tourism after the Sept. 11 terrorist attacks.
Aladdin's bankruptcy filing could open the door for a takeover by Park Place Entertainment Corp., which owns one-third of the Aladdin's junk bonds. Park Place officials have declined comment.
The Desert Passage shopping center, which is attached to the Aladdin, is independently owned and financed and is not included in the Chapter 11 filing.
"We're going to remain open for business as usual," said Andrew Blair, executive vice president and chief operating officer of TrizecHahn, the company that developed Desert Passage.
"The Chapter 11 itself will provide a fresh start for the hotel-casino. With that strengthened financial structure, this can really be a positive thing."