Negative cash flow reported by Aladdin

David Strow

Thursday, Nov. 15, 2001 | 10:37 a.m.

The parent company of the bankrupt Aladdin hotel-casino reported a massive loss and negative cash flow for the quarter ending Sept. 30.

Aladdin Gaming Holdings LLC -- an entity that did not file for bankruptcy -- reported a loss of $86.2 million for the quarter, compared to a loss of $40.2 million taken in the year-ago quarter. About $27.1 million of the Aladdin's loss for the third quarter of 2001 was from non-cash charges related to the Sept. 28 bankruptcy filing of the hotel-casino.

About $39 million of this loss came from interest charges, which will largely be lifted now that the Aladdin is bankrupt.

However, the property's operations were not profitable. The Aladdin posted negative cash flow of $5.8 million during the quarter, compared to positive cash flow of $12.6 million in the June 30 quarter. The Aladdin's operating loss for the quarter was $20 million.

The cash flow loss included one-time charges of $1.04 million in professional fees related to the bankruptcy that were recorded before the Sept. 28 filing.

Revenues were up substantially during the quarter, rising 54 percent to $56.5 million. Casino revenues were up 37 percent to $26.6 million, hotel revenues rose 77 percent to $20 million, food and beverage revenues rose 91 percent to $15.9 million, and entertainment and other revenues increased 86 percent to $2.9 million.

However, the Aladdin was open just six weeks during the year-ago quarter, creating an easy comparison for the company. Compared to the June 30 quarter, revenues were down 26.4 percent.

The Aladdin was apparently hurt by very poor table game hold during the quarter -- its 12.6 percent hold rate during the quarter was well below the 17.5 percent considered normal. The Aladdin's 96 tables, as a result, recorded average daily win per table of $1,459 during the quarter, compared to $2,182 over the first nine months of 2001. Average win per slot per day, however, rose from $93 in the June quarter to $98 in the September quarter.

Occupancy was just under 90 percent for the quarter, compared to 96 percent in the June 30 quarter. The hotel recorded an average daily room rate of $95, down from $120 in the second quarter.

This downward trend is expected to continue; the Aladdin said it expects occupancy to average 75 percent during the fourth quarter, at an average daily rate of $100.

"The competition for hotel visits from Southern California has become more intense," the Aladdin's quarterly report said, resulting in lower occupancy and room revenues. "Although weekend occupancy levels and rates are returning closer to normal, weekday occupancy levels and rates continue to struggle. The (Aladdin) anticipates this trend to continue into the 2002 first quarter."

The company's report held out some hope for creditors of the bankrupt Aladdin; debts covered under the Chapter 11 bankruptcy case were $560.6 million, compared to assets of $670.6 million. However, the bankruptcy case does not cover $177 million in junk bonds.

These junk bonds are held by Aladdin Gaming Holdings, which has yet to file for bankruptcy. However, that could still happen. The company indicated that it is in default on the junk bonds, and does not have the ability to repay them if the bondholders try to accelerate repayment.

The Aladdin received a $9 million emergency loan from its bankers when it filed from bankruptcy, and the resort said this should be enough to fund operations through Dec. 31. The bankers have committed to provide the Aladdin with up to $50 million in financing.

"The company believes the ($50 million loan) and cash from operations should provide the (Aladdin) with adequate liquidity to conduct its business during the Chapter 11 case, although no assurance can be given in this regard," the report said.