GE Capital critical of Aladdin plan

David Strow

Monday, March 25, 2002 | 11 a.m.

News that Atlantic City casino operator Colony Capital LLC is eyeing a buyout of the $1.2 billion Aladdin for $500 million or less has drawn fire from one of the largest creditors of the bankrupt Las Vegas Strip resort.

GE Capital Corp., the Aladdin's equipment lease financier, filed an objection to the Aladdin's February proposal to liquidate the property in a court-supervised sale.

GE Capital cited reports that Colony is negotiating a buyout at a price too low for GE Capital to be paid.

Sources have indicated to the Las Vegas Sun that the price now under negotiation is anywhere from $375 million to $500 million.

GE Capital claims it's owed as much as $80 million, but the banks have a claim of $437.5 million -- and they must be paid off in full before any proceeds can be distributed to other creditors.

That means the Aladdin would have to be sold for at least $517.5 million for GE Capital to receive full payment. But GE Capital is arguing the Aladdin doesn't have the right to negotiate a sale for less without its consent, since GE Capital's claims are secured by the Aladdin's slot machines and equipment. The Aladdin's initial filing outlining sale procedures indicates that the resort will be sold as a single entity, which would include the slots and equipment.

The revelation that the Aladdin was negotiating quietly for a lower price "is wholly consistent with the premise that the (Aladdin) is operating with the sole purpose of satiating the bank group, without regard to the interests of additional creditors," wrote GE Capital attorney Candace Carlyon, who demanded that the Aladdin provide sale plans to all creditors for review.

Carlyon noted that the Aladdin's financial situation had steadily improved since the bankruptcy filing.

"Thus, this is not a case where the debtor must rocket toward an asset sale outside the (court-supervised) process, due to rapidly deteriorating assets or a lack of operating capital," Carlyon wrote.

A hearing on GE Capital's objection is set for April 4.