Judge approves Aladdin plan

Friday, Aug. 29, 2003 | 10:53 a.m.

The Aladdin hotel-casino is another step closer to going Hollywood after a U.S. Bankruptcy Court judge in Las Vegas on Thursday approved the Strip property's reorganization plan.

Judge Robert C. Jones, after an hourlong hearing, approved the plan, which helps pave the way for a group headed by Planet Hollywood International Inc. Chairman and Chief Executive Robert Earl to buy the 2,587-room Aladdin out of bankruptcy.

Earl, backed by financier Bay Harbour Management LC, New York, and hotel operator Starwood Hotels and Resorts Worldwide Inc., White Plains, N.Y., intends to convert the property into a motion picture-themed Planet Hollywood hotel-casino.

Earl's OpBiz LLC, Orlando, Fla., was selected as the best bidder for the property in June and will pay $635 million for the property, which opened in August 2000 with a $1.2 billion price tag.

The next major hurdle for Earl to clear is for him and Bay Harbour managing principal Doug Teitelbaum to be licensed by Nevada gaming regulators. Earl and Teitelbaum already have submitted applications to the state Gaming Control Board.

Mike Mecca, formerly general manager of Green Valley Ranch Station Casino, is president and chief executive of the Aladdin and has been licensed in the past, so his application is expected to be approved quickly.

Gerald Gordon, an attorney for the Aladdin, said in court Thursday that the reorganization plan would not take effect until the licenses are approved, which could take several months. Court officials discussed June 30 as a possible closing date for the sale.

Jones thanked and congratulated Gordon for his work on the case, which began in September 2001 when the hotel, undercapitalized since it opened and struggling even more after the Sept. 11 terrorist attacks, filed for Chapter 11 bankruptcy protection.

"This has been handled extraordinarily well," Jones said from the bench.

Gordon said hundreds of creditors were broken into 13 classifications, each treated differently according to bankruptcy law. On average, creditors will receive between 40 cents and 50 cents on the dollar based on settlements outlined in the reorganization plan.

At the top of the list are priority wage claims and benefit plan contribution claims being paid in full. At the bottom are equity interests of investors, who get nothing.

In between are classes involving the resort lenders, equipment lenders, claims from the owners of the Desert Passage shopping mall and other creditors with various claims.

The only snag in the final approval process came when three companies landed on a list of companies whose contracts may not be renewed when the ownership of the resort changes hands.

Under the bankruptcy code, Aladdin owners were required to file a list of rejected and assumed leases so that creditors could consider them when they voted for or against the plan. Attorneys for the Aladdin filed those lists Aug. 1 and Monday was set as the deadline for filing objections. There were 29 rejectable contracts listed in a supplement to the reorganization plan.

William Noall, an attorney for the Aladdin, said placing contracts on that list is based strictly on economics and rejected contractors can renegotiate the terms of their deals with the new owner.

One objection was filed in the case by P.F Chang's China Bistro Ltd., which leases 11,351 square feet at the Aladdin for an Asian restaurant. An attorney for P.F. Chang's wanted to ensure the company's status in the case in filing the objection Aug. 22. Under settlement terms, P.F. Chang's would receive $258,376 from Aladdin if the contract is broken.

The restaurant signed a 15-year lease with a five-year option with the Aladdin in February 2000 and pays the Aladdin 5 percent of its gross sales under the terms of the lease. The new owners of the hotel would have until 30 days before the close of the deal to determine if it wants to reject the lease.

Jones allowed Aladdin and P.F. Chang's to negotiate until January to determine if the settlement terms should be modified.

Other inquiries from Hospitality Network Inc. and Starbucks Coffee were settled prior to the court hearing Thursday.