Stratosphere creditors coming out of the woodwork

Brian Seals

Friday, May 1, 1998 | 10:11 a.m.

Claims registered against the bankrupt Stratosphere hotel-casino total a staggering $887 million.

But the amount Stratosphere will actually owe will be whittled down substantially as it goes through bankruptcy restructuring.

Stratosphere has reported in filings to the Securities and Exchange Commission it owes $313 million. Most of the $887 million in bankruptcy claims compiled by the Arthur Andersen accounting firm are duplicates or will be found to be invalid.

"It's not indicative of the actual extent of the claims," said Gerald Gordon, an attorney representing the Stratosphere.

He said the listing was an account of every claim ever filed without any review for validity or duplication. The actual amount owed will be closer to the $313 million previously reported, Gordon said.

Jeff Truitt of Arthur Andersen said a listing of claims is simply part of the bankruptcy process. Both the Stratosphere Corp. and the Stratosphere Gaming Corp. filed for bankruptcy and in some cases creditors may file a claim against both, to be safe, when they only have a claim against one of the companies.

"When a company files for bankruptcy, the claims really come out of the woodwork," Truitt said. "I can tell you unequivocally it's not going to be that much."

For example, the listing includes $127 million in claims by former Stratosphere Chairman Bob Stupak that he agreed to withdraw as part of a class action settlement over vacation packages sold to fund construction of the mammoth Strip landmark. Also, the indentured trustee representing interests of bond holders filed a claim for $224 million against both companies, but that doesn't mean it is seeking the sum of those two claims.

"The claims process and the process to validate those claims will take a little time," Truitt said.

Meanwhile, the company faces a May 15 hearing on a restructuring plan that most associated with the company expect to go smoothly.

That plan would cancel existing stock in the company and re-issue new stock to people who own first-mortgage notes. Financier Carl Icahn's High River Limited Partnership, American Real Estate Partners and Grace Brothers Ltd. own about 88 percent of those notes.

Also, the company settled a class action suit in March brought by people who purchased vacation packages at the resort. The class won $3 million for legal fees and the company agreed to honor the packages. That plan, too, faces approval of the bankruptcy court.