Progress reported in Aladdin sale process

David Strow

Tuesday, April 16, 2002 | 11:10 a.m.

Plans to sell the Aladdin are apparently moving forward once again, despite a legal battle that had threatened to postpone the process.

For the past several weeks, attorneys for the bankrupt Las Vegas Strip resort have been trying to negotiate with creditors to come up with a plan that would allow the $1.2 billion property to be sold outside of a formal reorganization plan. Though the Aladdin is already being marketed to potential buyers, this plan would provide a blueprint for identifying and negotiating with potential bidders in a quick and orderly fashion.

Efforts to draft a plan appeared to hit a snag last week, when bankruptcy Judge Robert Jones threatened to delay approval of a sales procedure plan until the Aladdin could resolve a legal dispute with Northwind Aladdin LLC, operator of the Aladdin's water heating and cooling plant.

While no decision was made Monday, Jones now appears far more willing to move forward with a plan.

"I'm greatly encouraged by the progress you're making (in negotiations between the Aladdin and creditors)," Jones said. "I'm encouraged we have a common approach in realizing the highest and best value for this facility."

A hearing to discuss possible approval of the plan was pushed back until later this month while negotiations continue. But Aladdin attorney William Noall told Jones that the two sides were "very, very close" to a plan that would be acceptable to all sides.

"We believe we're going to achieve consensus on a sales process," Noall said.

Creditor attorneys agreed. Candace Carlyon, attorney for GE Capital Corp., called the talks "tremendously positive," while unsecured creditors committee attorney Frank Merola said all parties are "committed to structuring a marketing process that is in everyone's best interest."

GE Capital, which provided lease financing for the Aladdin's slots and other equipment, had protested it was being excluded from talks with potential buyers by the Aladdin's banks, who have first position for repayment. The unsecured creditors had protested that the Aladdin was rushing toward a sale without looking at all alternatives.

The most likely outcome, at this point, appears to be a sale of the Aladdin to Los Angeles real estate firm Colony Capital, which is said to have offered somewhere between $375 million and $500 million for the property. There has been speculation that California casino company Pinnacle Entertainment Inc., under new Chief Executive Dan Lee, would partner with Colony on a bid, though Pinnacle executives have said they aren't looking for a deal in the near-term.

But the sale of the Aladdin outright is not the only possible outcome, Merola said. It is still possible another company could take over the Aladdin through reorganization, as Carl Icahn did with the Stratosphere, Merola said.

In any case, there is no pressure to quickly sell the property, Merola said, as the Aladdin is recording positive cash flow.

"We can take time to determine what is the best move," Merola said.

The Aladdin-Northwind dispute remains an open issue. Currently, both sides claim ownership of the plant, and have sued one another in bankruptcy court in an attempt to resolve the ownership question.

Jones said last week that it appeared "obvious" approval of a sale procedure plan would have to wait until the dispute was resolved. Both sides are now in settlement talks, and may be closing in on a deal.

"I think we're on the same ball field, and hopefully we'll stand on the same base shortly," Northwind attorney Joel Samuels said.