Banks extend Aladdin deadline

Friday, June 8, 2001 | 10:50 a.m.

Bankers for the Aladdin megaresort on the Las Vegas Strip agreed Thursday to extend the deadline for a "keep-well" payment from the Aladdin's owners until the middle of June, a source close to the situation said Thursday.

Additionally, the source said, the Aladdin is negotiating with its banks to extend the Aladdin's payment schedule on its debt, and should finalize an agreement within 10 days. The $8.7 million keep-well payment from Aladdin owners Sommer Trust and London Clubs International came due May 31, and would help shore up the property's balance sheet.

"It's expected before the (keep-well payment extension) expires, the company will have some new agreement with lending agents to carry (the Aladdin) through the rest of the year," the source said.

Renegotiation of the payment schedule on the Aladdin's $670 million in debt would be an important step in avoiding insolvency in the near-term. Currently, the property faces a $4.9 million debt and interest payment June 29, followed by an $8.8 million interest payment July 31. The Aladdin had just $9 million in cash on May 7, and made a $4.5 million lease payment on June 1.

By renegotiating this payment schedule, Aladdin officials believe cash flow and cash on hand would be enough to keep the $1.2 billion resort out of bankruptcy for the time being and carry it through its tough start-up period, the source said.

But Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown, believes such moves are only temporary solutions.

"Without the injection of new (equity) capital, this property will continue to struggle with the same issues over and over again, which is a poorly capitalized balance sheet," Zarnett said. "Whether or not the bank relaxes the payment schedule and postpones it somewhere out in the future, the issue of overleverage will haunt this property until the point that someone is willing to invest new capital in the company."