Arizona Charlie’s loan falls through

John Wilen

Monday, July 27, 1998 | 10:57 a.m.

The future of Arizona Charlie's is once again very much in doubt.

A $92 million loan that was to be used to pay off creditors of the bankrupt Decatur Street hotel-casino has fallen through, officials said. That gives Arizona Charlie's five days to find new financing or lose the property to billionaire Carl Icahn, owner of a majority of Arizona Charlie's debt.

Michael Brown, an attorney for United Healthcare Financial Services, the Southern California company that was to provide the loan, said United Healthcare does not plan to loan the money to Arizona Charlie's owner Bruce Becker.

"Unless there's some further substantiation of the business, that's probably correct," Brown said.

United Healthcare decided against making the loan after determining that Becker's financial forecasts for the resort were innacurate.

"There is some doubt as to whether their financial forecasting ... is accurate," Brown said. "Their assumptions were highly suspect."

In addition, United Healthcare has fired Stephen Goodman, the senior vice president who submitted documents to U.S. Bankruptcy Court in Las Vegas suggesting the company was prepared to offer Becker a loan, Brown said. Goodman could not be reached for comment.

On June 10, Goodman sent a letter to the Bankruptcy Court stating: "UHFS is providing proof that the funds for the loan to Arizona Charlie's have been arranged." Loan documents attached to the letter stated the loan's principal amount would be $95 million. Later, Becker said the principal had been reduced to $92 million.

Goodman should never have made such representations to the court, Brown said. Last week, Brown sent letters to the court and to Becker's attorneys requesting Goodman's letter be withdrawn.

The turn of events leaves Arizona Charlie's fate in doubt. Under terms of an agreement struck last month between Becker and Icahn, Becker has until Friday to pay the property's creditors. If Becker does not meet the deadline, Icahn takes control of the property.

Becker has been battling Icahn for control of Arizona Charlie's since the resort declared bankruptcy last November. Icahn bought a majority of the resort's $55 million first-mortgage debt notes last summer. Station Casinos also owns a minority interest in the notes.

Arizona Charlie's is owned by Becker Gaming Corp., which also owns a number of Arizona Charlie's bars around Las Vegas. Arizona Charlie's, with 258 rooms and 940 employees, caters primarily to locals.

Becker's agreement with Icahn contained two contingencies. For Becker to retain control of Arizona Charlie's, holders of the resort's first mortgage notes were to receive a pro-rated share of $61.6 million, a $6.6 million premium on the notes' original face value.

That scenario was contingent on Becker receiving financing by Friday. At the time of the agreement, all involved parties agreed the United Healthcare letter and loan documents were evidence that Becker would most likely retain control of Arizona Charlie's.

In the event Becker does not receive financing by Friday, the agreement's second contingency kicks in. Becker will lose all equity interest in Arizona Charlie's to Icahn. Other note holders will receive a pro-rated share of $52 million.

Additionally, either Becker or another company controlled by Becker will continue operating Arizona Charlie's for up to 60 days -- or until Icahn receives a gaming license -- at no charge. And Becker's family will either sell Icahn the Arizona Charlie's parking lots or sign long-term leases on the lots, which they own separately from the resort.

Becker had held the lots out as a bargaining chip in his court battle with Icahn.

Becker has already repaid the resort's trade creditors about $2 million.

Neither Becker or his attorneys returned numerous calls for comment.

Station Casinos last month dropped a competing bid for control of Arizona Charlie's under pressure from its merger partner, Crescent Real Estate Equities of Dallas. But last week, Station Casinos Chief Financial Officer Glenn Christenson left open the possibility that Station might still pursue the resort.

"We still have an interest in the property," Christenson said.