Tuesday, April 23, 1996 | 11:59 a.m.
The company announced it has received a $10 million loan commitment from CS First Boston, rescuing the property from the edge of bankruptcy.
The loan, including a new first mortgage, will enable the 193-room hotel to pay off unpaid bills of more than $3.5 million.
"It takes all the heat off the company," said Todd Fisher, CEO and son of the chairwoman, entertainer Debbie Reynolds. "We've got 200 creditors breathing down our neck."
Fisher said it's also a big boost to the company's effort to win a gaming license.
"It substantially improves our chances," he said.
The two-year loan, from CS First Boston Mortgage Capital Corp., has several conditions. A key requirement is that the hotel is appraised at $20 million. It's expected the loan will close within 20 days, said Fisher.
The hotel has no casino right now. All 182 slot machines and two blackjack tables were removed on March 31 by Jackpot Enterprises Inc. in a contract dispute.
The company's shares gained 20.3 cents, or 25 percent, to $1.03125, on trading of 289,100 shares Monday. That's the most trading ever in one day for the stock and more than eight times its average activity for the past three months.
The new loan will be secured by revenue from the hotel's time-share unit. CS First Boston will provide $8.5 million immediately, and an additional $1.5 million when the hotel receives a gaming license.
The first $8.5 million loan will bear interest at 500 basis points over the London Interbank Offer Rate. One hundred basis points equal 1 percent. When the remaining $1.5 million is lent, the interest rate on the entire loan will step up to 600 basis points over LIBOR.
The new loan will replace an existing first mortgage held by Bennett Management & Development Corp.
Reynolds, once cast as "The Unsinkable Molly Brown," is chairwoman and controlling shareholder of Debbie Reynolds Hotel & Casino Inc. Her 2.4 million shares have lost more than two-thirds of their value since last summer. The company owes her $1 million.
After 46 years in show business, Reynolds, 64, easily maintains a happy facade. Her screen credits include "Singin' in the Rain" and the Oscar-nominated starring role of Molly Brown, the Colorado socialite who survived the sinking of the Titanic.
"I'm not aware of any insurmountable problems," she said after a 90-minute performance, as she signed autographs for a stream of adoring, mostly elderly, fans.
Earlier, her fans howled their approval as Reynolds did uncannily accurate impressions of Zsa Zsa Gabor and Barbra Streisand. They loved it when she sang old show tunes. She's in her element.
Reynolds has pledged her Beverly Hills, Calif., home as collateral for loans to the hotel.
"There has been a lot of taking advantage of this company," said her son, citing Yesco Inc., which built the hotel's 100-foot outdoor electric sign.
The sign company claims the hotel is more than two years behind on the $12,000 monthly lease payments.
"If it had been anybody but Debbie, creditors wouldn't be as forgiving," said Yesco's credit manager, Randy Clark. Yesco is among the companies that have filed suit against the hotel.
Not everyone loves Reynolds. The hotel's former attorney, Edward Coleman, said Reynolds' $25,000-a-week performance contract with the hotel was extravagant. "She never made that much money in her life," said Coleman. He's suing for unpaid legal fees.
Reynolds bought the old Paddlewheel hotel at auction in 1992. She brought it public two years later.
"I really do not run the hotel," Reynolds said. "If I tried to, I wouldn't be 64. I'd have died two years ago of overwork."
Reynolds was interviewed in the 6,000-square-foot room that, until last month, overflowed with slot machines. Now the room is partially filled with props from her massive Hollywood memorabilia collection. She sat next to her shiny red 1952 MG convertible. Both are in mint condition.
Reynolds said her company has applied to the State Gaming Control Board for a gaming license. Until last month, it simply rented its casino space to Jackpot for about $30,000 a month. The company believes it lost about $25,000 a month on the lease, after expenses.
The company lost $4.2 million in 1994, and about the same in 1995. The precise amount is unknown. That's because it can't afford to pay its outside auditors, KPMG Peat Marwick, the company said in a recent Securities and Exchange Commission filing.
As the company's financial health flagged last year, four of the company's six directors quit, leaving only Reynolds and Fisher.
Fisher, a professional sound-stage and studio designer, has been CEO for about eight months. He said he took over when he realized expenses were out of control.
"We had an employee dining room that was burning $35,000 a month," Fisher said. He fired 100 employees, bringing the head count down to about 200.
He's made his share of mistakes, though.
In December, the company issued options for 750,000 shares of stock to consultant Peter Bistrian and an associate.
"He had a pretty good reputation," said Fisher, who said he wishes he did more checking.
Bistrian was a convicted felon, who'd served prison time for bank fraud. All 750,000 shares were issued when the options were exercised, but Bistrian and his associate never paid for the shares.
Earlier this month, Bistrian began a 30-month federal prison sentence after pleading guilty in Philadelphia to defrauding investors in 1993 by selling them phony shares of another casino company.
The company's main lender has its own legal problems. The Debbie Reynolds hotel borrowed $5 million from Bennett Management & Development Corp. in 1994 and 1995.
Last month, the SEC accused an affiliated company, Bennett Funding Group Inc., of defrauding investors on $570 million of securities backed by fake equipment leases.
Bennett Funding Group filed for bankruptcy after the SEC's action. Some Bennett investors claim in a lawsuit filed in New York last week that Bennett illegally diverted money to casinos, including the Debbie Reynolds property.
Michael Bennett, who resigned this month as deputy chief executive officer of Bennett Funding Group, served briefly last year as a Reynolds director.
Fisher said he's looking for a merger partner to rescue the company.
"Debbie and I are both tired of playing the game," he said. "In the next 30 days, you'll see something radical happen."
Reynolds expects things to get better.
"With wonderful advice and people that believe in us, we'll make it," she said, paraphrasing something she said on the silver screen 33 years ago in her most famous role.
"That ship may be down, but not me," said Molly Brown. "I'm unsinkable."
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