LV firm’s $13.8 mil. show business deal collapses

Thursday, April 29, 1999 | 12:15 p.m.

Financial problems at On Stage Entertainment Inc. of Las Vegas caused the collapse of a deal in which On Stage wanted to purchase the entertainment division of Casino Resource Corp. of Ocean Springs, Miss.

On Stage announced last September it agreed to buy from Casino Resources its Country Tonite Enterprises Inc. unit and CRC of Branson Inc. subsidiary for $13.8 million.

The deal was to include the assets and property of the Country Tonite Show in Branson and a one-year contract to produce the Country Tonite Show in Pigeon Forge, Tenn.

Casino Resource Corp. said today it was advised by On Stage that On Stage was unable to obtain financing for the deal. On Stage planned to fund the purchase using $6 million of its mortgage-financing facility, $6.5 million by privately placing equity and $1.3 million by issuing a two-year, 9.5-percent note to the seller.

The Country Tonite assets to be purchased by On Stage produced revenue of $10.7 million in the year ended Sept. 30, 1997, along with earnings of $3.9 million before interest, taxes, depreciation, amortization and management fees charged by Casino Resource Corp.

On Stage already has stage shows running around the nation, including Legends in Concert shows, dinner shows, variety shows and special events. Its only Las Vegas show is the Legends in Concert show at the Imperial Palace. Other cities it operates in include Orlando, Fla.; Myrtle Beach, S.C.; Atlantic City, N.J.; Branson, Mo.; and Buena Park, Calif.

Kiran Sidhu, On Stage chief financial officer, said the Casino Resource deal was canceled as On Stage concentrates on its internal reorganization. He said all of the company's shows are profitable with healthy margins of 20 percent to 40 percent, but that On Stage has heavy growth overhead costs that must be trimmed.

Sidhu said On Stage hopes to return to profitability by the third quarter and when that happens it could look again at growth plans.

On Stage earlier this week said it is restructuring to improve cash flow as it reported a fourth quarter loss of $3.2 million and negative EBITDA (cash flow) of $2.1 million. For the year, the loss of $4.9 million or 68 cents per share compared to a 1997 loss of $2.9 million or 55 cents. Quarterly sales of $7.8 million were up from $4 million in the 1997 fourth quarter. The company took a pre-tax charge of $2.5 million in the quarter, primarily for asset write-downs and pre-opening cost write-offs. On Stage said its money-losing Toronto operation is now closed and that it's negotiating with lender First Security Bank to roll over its $1 million credit facility, which expired in March.

On Stage said it's working with its mortgage lender, Imperial Credit Commercial Mortgage Investment Corp., "to reschedule payments and to waive or amend certain other defaults under the Company's mortgage facility."