Partners bidding for Regent resort break up

David Strow

Thursday, July 5, 2001 | 11:06 a.m.

A sudden, unexpected rift has developed between Peccole Nevada Corp. and Heller Financial Inc. of Chicago, identified in May as the first bidders on the bankrupt Regent Las Vegas hotel-casino.

The two companies had planned to acquire the Summerlin resort out of bankruptcy in a $150 million bid. But on Sunday, Peccole pulled out of the deal.

Now Heller is pitching a plan to acquire the Regent with a new partner -- PDS Gaming Corp. of Las Vegas. Peccole, a real estate developer, appears determined to make a competing run at the Regent.

"Peccole has withdrawn from the deal under its current structure," said Lynn Purdue, spokeswoman for Peccole. "However, they do remain very interested in purchasing the property, and they are pursuing other partners to complete the deal."

Purdue declined to comment on why Peccole pulled out, citing confidentiality agreements.

"If I had to guess, they're all fighting about their contributions (to the entity that would control the Regent)," said Frank Merola, attorney for the Regent.

However, Merola said the split could end up benefitting the Regent's creditors.

"They might split into subgroups and bid against each other, which could only help the creditors," Merola said. "Whoever has the best (offer) is the one we'll go with (as the 'stalking horse' bidder)."

The stalking horse bidder is the first bidder identified in the process of auctioning off the bankrupt property. Although other bidders can offer more for the property, the stalking horse has the right to match any "overbids."

The Regent could also select another stalking horse bidder altogether from among the parties that have expressed interest in buying the Regent, Merola said.

"Even if this group goes away, the debtor still has options," Merola said.

Under Heller's new proposal, it appears PDS Gaming would lease the property from Heller and become the casino's operator, as Heller isn't interested in becoming a casino operator.

PDS, however, is a licensed casino operator; it currently owns and operates the Gambler casino in downtown Reno. The company also sells refurbished slot machines and provides lease financing for gaming equipment to casinos.

The Regent's attorneys were supposed to submit a plan to a U.S. bankruptcy judge Tuesday to approve the procedures by which other companies could attempt to outbid the Heller-Peccole coalition for the property. That hearing was delayed for a week while Regent attorneys gather more information about the Heller-PDS bid -- and find out whether or not the original group can be patched back together.

"It's a very complicated transaction," Merola said. "I've never done one of these things (a bankruptcy sale procedure) that hasn't blown up at least once."

As disclosed in court Tuesday, the original plan being discussed called for Heller to acquire the property, then lease it to a partnership comprised of four participants -- Heller, Peccole, PDS and Swiss Casinos of America. The bid called for the payment of $85 million cash to the property's creditors, plus $25 million in bonds. About $40 million of the price would come through assumed leases.

It is not known whether Heller and PDS are offering similar terms in their new offer.

The Regent leases much of its gaming equipment from PDS, making that company a substantial creditor. Swiss Casinos is the equity owner of the Regent.

The potential involvement of these companies has angered some parties involved in the Regent's bankruptcy case. John Whittington, an attorney representing J.A. Jones Construction Co., demanded that the Regent disclose details of the involvement of both PDS and Swiss Casinos in the bidding group. J.A. Jones has a $29 million lien against the Regent for unpaid bills; the Regent has sued J.A. Jones for $200 million, claiming delays in the property's construction helped cause its bankruptcy.

"The debtor has a fiduciary duty to disclose all relationships of everyone involved in this transaction," Whittington said. "(Disclosure) has been too little, too late, too narrow."

But with the Peccole-Heller bid in limbo, Merola said that currently isn't possible.

"That side of the deal has to stay still long enough for me to make these disclosures in a meaningful way," Merola said.

The new developments in the Regent's bankruptcy could push the final approval of the sale of the Regent into late August, Merola said. The property has a credit line of $20 million to get it through the process to a final sale.

Even if there's a delay, there's little risk that the property's credit could be exhausted and the Regent shut down, said Regent Chief Restructuring Officer Lanis O'Steen.

"We're in good shape in that regard, because we're significantly ahead of our (financial) projections," O'Steen said.