Atlantic City casino owner interested in buying Aladdin

David Strow

Thursday, March 14, 2002 | 11:07 a.m.

The former owner of Harveys Casino Resorts is interested in a deal to acquire the Las Vegas Strip's Aladdin hotel-casino out of bankruptcy, sources familiar with the matter told the Las Vegas Sun on Wednesday.

An affiliate of Colony Capital LLC, a Los Angeles real estate investment firm, was identified as the buyer by several independent sources, but no one could confirm whether a letter of intent has been signed. The price was not clear either, with sources saying the property would be sold for anywhere from $375 million to $500 million.

Such a deal would have to win the approval of the Aladdin's bankers to proceed, and it may be difficult to convince them to accept a bid below the amount they are owed. The banks are owed more than $430 million, and they possess the right to "credit bid" -- that is, to offer a bid for the Aladdin for up to the amount of their outstanding debt.

In either case, the price would be far below the $1.2 billion it cost to build the 20-month old Aladdin. It also wouldn't result in full recovery for all of the Aladdin's creditors, who are owed about $619 million.

Aladdin and Colony officials both declined comment.

Colony has no holdings in Las Vegas, but it is involved in the gaming industry. It currently owns Resorts Atlantic City, a property it bought from Sun International Hotels last year for $140 million. Colony officials said in February they will proceed this summer with a $125 million expansion of Resorts.

The property's vice chairman is Nicholas Ribis, former president and chief executive of Trump Hotels & Casino Resorts. Colony's chairman is real estate tycoon Thomas Barrack Jr.

Colony would have an advantage in the Nevada licensing process, as it formerly was the licensed owner and operator of Harveys Casino Resorts of Lake Tahoe, a chain that includes Harveys Lake Tahoe. Colony sold this chain to Harrah's Entertainment Inc. last year for $675 million.

Colony also attempted to acquire Pinnacle Entertainment Inc., a Glendale, Calif., casino operator for $1.4 billion. The deal was announced in March 2000, but was repeatedly delayed after Colony ran into difficulty trying to complete a $625 million high-yield bond deal. Tough market conditions ultimately kept the bond deal from happening, and Colony called off the Pinnacle acquisition in January 2001.

If the Aladdin follows the sale plan it proposed earlier this year, Colony could still face competition. A court filing made by the Aladdin in February proposed a process almost identical to that used in the sale of the Regent Las Vegas (now JW Marriott Las Vegas) last September.

Under such a process, Colony would be designated a "stalking horse" bidder, and other companies would have 30 days to present a higher bid to the Aladdin and its banks, though the Aladdin would have to right to turn down any counteroffers. Bankruptcy Judge Robert Jones would have to approve a final agreement.

Even before the Aladdin opened in 2000, Park Place Entertainment Corp. was seen by many as the logical buyer for the Aladdin if it fell into financial difficulty. Park Place hasn't ruled out a purchase of the property, but has not shown much enthusiasm for a buyout in recent months.

Other names that have been bandied about as potential suitors for the property in recent weeks include MGM MIRAGE, Harrah's Entertainment Inc., Stratosphere owner Carl Icahn, Silverton owner Ed Roski Jr., Sun International Hotels, Starwood Hotels & Resorts Worldwide and even Macau casino tycoon Stanley Ho.