Station Casinos offers $61 million for Arizona Charlie’s

John Wilen

Monday, May 11, 1998 | 10:09 a.m.

Station Casinos Inc. on Friday made a $61 million offer to creditors of the bankrupt Arizona Charlie's hotel-casino.

The offer, filed in the form of a reorganization plan with U.S. Bankruptcy Court in Las Vegas, will compete for creditor acceptance with a plan already filed by Arizona Charlie's parent Becker Gaming Inc., and with a plan expected to be filed by financier Carl Icahn's High River L.P.

All competing reorganization plans were due at bankruptcy court on Friday. As of Friday evening, Icahn's plan had not been filed. As long as Icahn's plan was placed in the courthouse drop-box before midnight, Friday, it would be on time, clerks said.

Calls to Icahn's attorneys were not immediately returned.

Arizona Charlie's is a property on Decatur Blvd. near U.S. 95 with 258 rooms and 940 employees.

It declared bankruptcy in November largely as a result of Becker Gaming's inability to sell or get a license to operate its Missouri riverboat, the Capitol Queen. Arizona Charlie's had guaranteed Capitol Queen debt notes worth about $20 million, and declared bankruptcy to retain its ability to contest the validity of those guarantees.

Icahn owns 51.3 percent of Arizona Charlie's mortgage debt, which he has purchased since the resort declared bankruptcy. Station Casinos Inc. owns a small percentage of Arizona Charlie's mortgage notes, also purchased since bankruptcy.

Under its reorganization plan, Station would own Arizona Charlie's after paying the resort's creditors $61 million.

"As a result of Station's extensive gaming and hotel business operations, and the fact that it is currently licensed by various applicable gaming and other regulatory authorities, ... (Station) is uniquely positioned to facilitate the restructuring of Arizona Charlie's Inc. ... in the most favorable manner," states Station's plan.

Station operates four locals properties in the Las Vegas area and has casinos in Missouri.

Station officials declined comment. Station is in the process of merging with Crescent Real Estate Equities Inc.

In its bankruptcy court filings, Station claims its plan would give Arizona Charlie's creditors more money more quickly than plans proposed by Becker Gaming and High River, without a number of those plans' limitations.

In the case of Becker Gaming, limitations include, "financing from a third-party lender that is contingent upon many conditions that which most likely will not be satisfied; (and) reliance on unprecedented growth in the debtor's business necessary to make plan payments and increase values," states the Station plan.

Becker plans to finance its reorganization in part with a $70.5 million loan from United Healthcare Financial Services. In several recent bankruptcy court hearings, attorneys for Icahn and Station have repeatedly argued that the terms of the loan cannot be met because Becker is being overly optimistic about Arizona Charlie's future financial prospects.

Becker's attorneys dispute that claim, arguing that few bankrupt companies can secure such a large loan. Financing has be extended, they contend, because their financial projections are reasonable.

Reached at his office Friday, Arizona Charlie's President Bruce Becker said he had not yet been served with the Station plan, and largely declined comment. But he did argue that Station would also need a loan to finance its plan.

"Their funding has to come from a third-party lender also," Becker said.

Station's plan differs from its competitors primarily in its $52 million cash payment to holders of Arizona Charlie's mortgage notes. Becker's plan would repay $43 million to $45 million. In a proposed plan filed with bankruptcy court, Icahn would simply give noteholders equity in the reorganized company.

Most other claims would be paid in full, without interest, under the Station plan. Becker would lose all equity in Arizona Charlie's under both the Station and Icahn plans.

After a hearing later this week, all three plans will be sent to Arizona Charlie's creditors, who will vote for their preferred plan. Balloting will be revealed, and a final plan selected and approved, in June.

Icahn is using a similar debt-buying strategy to take over the beleaguered Stratosphere Hotel and Casino. A hearing to approve Icahn's Stratosphere takeover is scheduled Friday.

Despite Becker camp claims that he is a corporate raider looking for a fat payday, Icahn said recently he is interested in owning Arizona Charlie's, which he called a good value. Icahn also said he wants to put "some money," into the resort.

Station's plan also attacked Icahn's proposal, noting the billionaire has not yet been licensed by Nevada gaming regulators, a factor which could force an Arizona Charlie's shutdown if Icahn's bid wins.

Becker has said he expects to retain control of Arizona Charlie's, noting that his family controls the leases for the parking lots surrounding the resort.