Judge OKs Aladdin utility deal

Adam Goldman

Friday, Dec. 13, 2002 | 11:06 a.m.

A federal bankruptcy judge has approved a settlement involving the Aladdin resort and the Northwind utility plant that should help clear the way for a future sale of the hotel-casino, court records show.

A lawsuit between the two brought into question who owned the $40 million plant, which is on Aladdin property. The Northwind Aladdin company has a 20-year lease to supply the casino with water.

The deal keeps the Northwind plant in business and ensures it will continue to provide hot and cold water to Aladdin customers and serve as an emergency generator. The plant also pipes cold water to the Desert Passage Mall that adjoins the casino.

Bankruptcy Judge Robert C. Jones signed off on the settlement Tuesday.

The settlement calls for the casino to slash by half its equity payments to Northwind. The Aladdin also agreed to pay Northwind about $2.5 million, most of which will paid immediately.

Reducing the payments will save the casino about $12 million over the next 17 years, Aladdin lawyer William Noall said.

"The settlement is fair and reasonable and still keeps Northwind as a viable entity," Noall said.

Northwind feared that as the casino attempted to reorganize in bankruptcy court it would reduce its payments "so low as to be inadequate for Northwind to sustain operations," it said in a court filing.

The complex lawsuit could have cost Aladdin and Northwind hundreds of thousands of dollars if it had gone to trial. With Aladdin in bankruptcy and Northwind teetering on it, saving money was critical to both companies.

Also, a lengthy fight in court might have delayed a possible sale of the bankrupt Aladdin. Noall made clear in court filings that resolving the lawsuit was vital.

"The litigation is an impediment to the sale of the hotel-casino, and the litigation raises the risk of an impediment to the supply of utility services to the resort," he wrote in court documents.

Northwind lawyer Carter Culver said the settlement prevented a bad scenario from playing out.

"They would have had to get their hot and cold water from somewhere else," Culver said. "That's for sure."

That obviously would have been "problematic for the buyer," Culver said. And it would cost the Aladdin millions and about 12 months to build a substitute plant while forcing Northwind to continue to operate.

The Northwind lawyer added there was a possibility one of the unsecured creditors in the Aladdin bankruptcy could appeal the judge's ruling.

"They thought they whole arrangement should be part of a total reorganization plan," he said.

Lawyer Michael Solow, who represents the Aladdin's secured creditors, said no challenge would come from his clients.

"We were pleased with Judge Jones' ruling on Northwind," he said.