Buyer backs out of Debbie Reynolds deal

John Wilen

Friday, June 12, 1998 | 10:56 a.m.

It's back to square one for the Debbie Reynolds hotel-casino.

The bankrupt off-Strip resort Thursday lost its third buyer in the past year -- Calstar LLC, a company based in Washington, D.C., and Southern California.

Calstar had offered $15.5 million for the 193-room hotel and casino. The company's offer was the second highest received during an April bankruptcy court hearing.

"It's a nightmare," said Saylor Kennedy, Calstar's negotiator. "The building needs quite a bit of immediate mechanical renovation." He said there's also a possible environmental problem because of a diesel leak from an emergency generator.

But David Atwell, a broker at Resort Properties of America, the court-appointed exclusive broker for the resort, characterized the environmental concern as an excuse.

"We're disappointed, but regardless we're going to sell the property," Atwell said.

David Crabtree, a Debbie Reynolds spokesman, said the company was considering liquidation, among other options. Atwell said liquidate is simply another word for sell.

"We're probably going to hold a bid process," Atwell said. "We're going to put it back out to bid and take the highest offer."

The new bidding process will likely start within the next 60 to 90 days, Atwell said.

The Debbie Reynolds resort declared bankruptcy last July, after ILX Inc., a Phoenix-based time share developer, backed out of a $16.8 million acquisition offer. At the same time Debbie Reynolds, who owns 26 percent of the company's stock, declared personal bankruptcy. Reynolds had guaranteed a $1.1 million loan obtained by the resort in early 1997 to hold it over until after the ILX sale.

After declaring bankruptcy, the resort reached a $14 million acquisition agreement with Florida time-share developer David Siegle. But Calstar made a competing offer in bankruptcy court in April, forcing Siegle to up his offer to $15.6 million.

Siegle -- who had planned to add 1,000 new time share rooms to the resort -- dropped his bid in May after deciding that $15.6 million was $1.6 million more than the Debbie Reynolds was worth. Siegle's departure let Calstar step in as buyer with its $15.5 million backup offer.

Calstar would have purchased 92.5 percent of the resort. Unsecured Debbie Reynolds creditors would have received five percent of the resort, and current shareholders 2.5 percent.

Atwell is confident the Debbie Reynolds will be sold now that the price is biddable.

Located at 305 Convention Center Drive, the Debbie Reynolds features a 500-seat showroom in which Reynolds has performed. The casino has a restricted gaming license, operating slot machines only. More than half of the 7-acre property is undeveloped.

The company's shares fell 13 cents to 8 cents in trading of 85,500 Thursday, below its three-month daily average of 151,000. They traded as high as 6 1/2 in July, 1994.

Bloomberg News contributed to this report.