Nightclub venture at Aladdin still up in the air

David Strow

Wednesday, Nov. 7, 2001 | 10:50 a.m.

A federal bankruptcy judge has yet to decide whether a massive new nightclub and a show featuring actress Carmen Electra will make their home at the bankrupt Aladdin hotel-casino on the Las Vegas Strip.

The Aladdin went to court Tuesday in an effort to reject a lease claimed by Showclubs of America LLC on the Aladdin's showroom space. Showclubs had hoped to build out the showroom at a cost of $12 million to $14 million. The 1,200-seat showroom, featuring a show by Electra, would convert into a three-level nightclub.

The Aladdin had moved to reject this lease, saying Showclubs had provided an "untimely and illusory" financing package with unacceptable conditions. The Aladdin has not specified why it wants to turn the lease down, saying only in court documents that it believes a rejection is in the property's best interests.

Aladdin attorneys said in court Tuesday that company officials believe Showclubs does not have a valid lease, as the company hadn't started construction or even taken possession of the space.

Showclubs attorneys disputed this claim, saying they had met all of their duties under the lease agreement by providing the Aladdin with evidence of financing in early October. Without legal guarantees that the lease couldn't be terminated by a new owner of the Aladdin, the final documents could not be executed, they said.

Rather than ruling on the Aladdin's motion to reject the lease, Judge Robert Jones will begin a trial in December to determine whether Showclubs even has a lease. If Showclubs is found to have a valid lease, the Aladdin will still have the right to reject it, but could be forced to pay damages to Showclubs. It is also possible Jones could rule that Showclubs would be allowed to use the space even if the Aladdin rejects the lease.

If no lease exists, the Aladdin would be free to find a new tenant for the space, but Showclubs could still claim damages as an unsecured creditor.

The show was to have opened next spring. But because of the delays, the original deal to bring Electra to the Aladdin has been terminated, said show producer David Tumaroff.

But if Showclubs can prevail, "Carmen (Electra) would absolutely love to do this show," Tumaroff said. "She's told me so."

Separately, a final ruling approving a $50 million credit package for the Aladdin was delayed one week.

The $50 million in credit will be provided by the Aladdin's banks, led by the Bank of Nova Scotia. The Aladdin is operating with the assistance of a $9 million emergency loan provided by these bankers on an emergency basis; the $50 million will ensure that the Aladdin remains open through at least the end of 2002.

The terms of this credit package have been under renegotiation since September to address a variety of objections by other creditors. These concerns have primarily centered around the sweeping power of the banks to declare the loan in default, a move that could potentially cause the Aladdin to close.

Aladdin attorneys said a final loan agreement has been reached, but asked for more time so all parties could examine it before a hearing. That hearing was set for Nov. 16.

"The agreement is fair and reasonable, and in the best interests of the estate," said Aladdin attorney Gerald Gordon.