Icahn clears final hurdle to buy Stratosphere

Cy Ryan and John Wilen

Thursday, Aug. 20, 1998 | 11:22 a.m.

The Nevada Gaming Commission today gave final approval to Carl Icahn's purchase of the bankrupt Stratosphere hotel-casino, clearing the billionaire to take control of one of Las Vegas' most distinctive resorts.

The commission also followed the recommendation of the state Gaming Control Board in allowing Icahn to take a very limited role in the operation of the bankrupt Arizona Charlie's hotel-casino. Icahn is applying for a permanent Arizona Charlie's license, for which he is expected to receive final approval next month.

The actions give Icahn and minority partner Bradford Whitmore full authority to run the Stratosphere, and allow Icahn to consult with Arizona Charlie's managers in that resort's operation. Arizona Charlie's founder Bruce Becker will continue to run the resort for 60 days, officials said.

"You still call the shots," Control Board Chairman Bill Bible told Becker. "They can have access to the records. If you felt necessary, you could shove them through the door."

"That won't be necessary," Becker replied.

For the right to fully operate Arizona Charlie's, Icahn must await full licensure. Because the fate of Arizona Charlie's was decided shortly before the Control Board hearing earlier this month, Icahn submitted an emergency application to participate in operations.

Though the commission approved Ichan's applications, commissioners questioned the financier about his past. Commissioner Sue Wagner, concerned about a dispute Icahn had with a flight attendants union when he ran TWA, asked what his policy would be toward the Stratosphere's unions.

Icahn said he will honor all union contracts.

"(Stratosphere managers) will work with the unions," said Icahn. "I find it easier to negotiate than to fight on these issues."

Icahn was also questioned about his association with corporate raider and convicted felon Ivan Boesky. He termed his contacts with Boesky "social."

"I didn't have much business dealings with Ivan Boesky," Icahn said.

Icahn said he will no longer place sports bets in New York, an issue he was questioned about at a previous board hearing.

Icahn also said he has no plans to sell the Stratosphere.

"I want to make it into a good and profitable enterprise," he said. "I'm not thinking about putting it up for sale now."

Icahn said he will immediately begin work completing a half-finished Stratosphere hotel tower, a project that will cost $80 million to $100 million. Additions will include a new swimming pool and spa.

Both Stratosphere and Arizona Charlie's are now generating positive cash flow, Icahn said. Icahn did not divulge his plans for Arizona Charlie's. He has previously said he would invest in improvements to the property.

Icahn gained control of the Stratosphere and Arizona Charlie's in the same way: he bought a majority position in each property's publicly traded debt, making him the largest creditor of each.

Clearly, the biggest power play for Icahn was his bid for the Stratosphere, the 1,444-room Strip resort is distinguished by a 1,149-foot observation tower visible throughout Las Vegas.

When Grand Casinos abandoned its investment in the Stratosphere, Icahn's restructuring plan took over, transferring all Stratosphere equity from stockholders to bondholders -- making Icahn the resort's owner. It was approved by bankruptcy court in May.

Gaming regulatory approval was the final step Icahn needed to take control of the Stratosphere.

Icahn's Arizona Charlie's bid was more contentious, pitting the New York financier against Becker, a Las Vegan with roots dating to wild west days.

Like the Stratosphere case, Icahn's Arizona Charlie's plan transfers all equity from Becker, the current stockholder, to bondholders, making Icahn majority owner.

As in the Stratosphere case, gaming regulatory approval is the final step Icahn needs to gain full control of Arizona Charlie's.