Park Place, Icahn boost stakes for bankrupt Atlantic City casino

John Curran

Wednesday, March 8, 2000 | 9:20 a.m.

ATLANTIC CITY, N.J. - Corporate raider Carl Icahn and casino giant Park Place Entertainment Corp. are upping the ante in their competing bids to pull the Sands Hotel & Casino out of bankruptcy.

Icahn wants to add $6 million to his bid and give bondholders a better deal, while Park Place has sweetened its pot by $10 million - to $40 million - according to new proposals filed Monday in U.S. Bankruptcy Court in Camden.

The plans will be put to a vote by creditors. But that probably will not break the deadlock, since the casino's two biggest bondholders - Merrill Lynch Asset Management and Icahn - are at odds. Merrill Lynch supports the Park Place plan.

Each class of creditors would have to endorse a plan by a two-thirds majority to have it approved by the court.

Icahn, who is known for buying distressed companies and then either selling them at a profit or dividing them to be sold piecemeal, had previously offered to invest $65 million, keep half the casino's common stock and give the rest to bond holders - along with $110 million in new bonds, in exchange for $182.5 milion in old bonds.

In his latest proposal, he offered to buy an additional $6 million worth of bonds and to change his formula for the bonds. He is now proposing that bondholders get 53 percent, to his 47 percent.

Park Place had proposed investing $30 million and offering $128 million in new notes. In its new proposal, it offered $40 million.

The Sands filed for protection under the U.S. Bankruptcy Code two years ago. Squeezed by competition elsewhere on the Boardwalk, the 532-room Sands reported losses of up to $37.6 million annually in each of the three years preceding its bankruptcy filing.

Park Place, which owns the nearby Bally's Park Place Casino Hotel and Caesars Atlantic City, says its bid for the Sands is superior.

Park Place has a track record of success in the casino industry and it controls the seven-acre Traymore site, which is located between the Sands and the Boardwalk and is the last developable Boardwalk parcel big enough to accommodate a casino, according to Park Place's filing in the Sands bankruptcy case.

"Under our plan, the equity and the debt will increase in value," said Clive Cummis, executive vice president for corporate and legal affairs for Park Place. "Our plan is the better plan in terms of the short- and long-term interests of the members of each class.

"We have proven our skills as a manager; Mr. Icahn's skill as a manager of casinos is still open to question," Cummis said.

The filing by Icahn, a billionaire financier, said his reorganization plan would give the Sands a stronger capital structure with less leverage. He says Park Place's proposal is flawed because it includes a $2 million annual management fee for Park Place and would require the debtor - the Sands - to pay for the attorneys, agents, brokers and advisors used by Merrill Lynch and Park Place in developing the bid.

His bankruptcy lawyer, Edward Weisfelner, did not return telephone calls seeking comment on the bid Tuesday.

Icahn also is making a bid for the Claridge Casino Hotel, next door to the Sands. He owns 34 percent of the Claridge's bonds and is vying to take it over, too.