Thursday, May 8, 2003 | 11:04 a.m.
A U.S. Bankruptcy Court judge has approved a sale procedure for the Aladdin hotel-casino, but not before reducing the amount by which the successful bidder must win.
Judge Robert C. Jones on Wednesday approved a motion establishing a partnership that includes the co-founder of Planet Hollywood and Starwood Hotels and Resorts Worldwide Inc. as the "stalking horse" bidder in the proceeding, which began when the Aladdin filed for Chapter 11 bankruptcy protection in September 2001.
The biggest point of contention in a three-hour hearing Wednesday concerned whether OpBiz LLC -- the partnership that includes Planet Hollywood's Robert Earl; White Plains, N.Y.-based Starwood; and Bay Harbour Management LC, New York -- was discouraging other bidders from participating in the process.
OpBiz wanted a rival bidder to be $17.5 million greater than its offer. Jones, however, said he feared that amount would produce a chilling effect on potential rival bidders.
Of that $17.5 million figure, $5 million represents a break-up fee that OpBiz would receive if it doesn't win the bid and $2.5 million is the maximum amount the company can claim in expenses if it fails to win.
Jones agreed to leave the $7.5 million break-up fee and expense amount intact, but said OpBiz could not use it like a credit as a factor to determine if it had the superior bid.
Once attorneys for the Aladdin, OpBiz, the creditors and one rival bidder agreed, Jones designated OpBiz the "stalking horse" -- the opening bidder and the standard rivals must beat.
OpBiz has made an offer of $635 million for the 2,587-room Strip property and intends to turn it into a Planet Hollywood-themed hotel to be managed by Starwood under its Sheraton brand.
Three primary creditors in the case -- the bank lenders, led by BNY Asset Solutions, the equipment lenders led by General Electric Capital Corp., and the committee of unsecured creditors -- all favor the OpBiz bid.
Approval of the motion in Bankruptcy Court starts the clock on the next step of the process, the qualifying of competitors to bid for the property. Prospective buyers will have until June 17 to show they are capable of financing a bid. An auction to sell the Aladdin is scheduled June 20.
Rival bidder Las Vegas Hotel Casino Investors LLC (LVHC), a subsidiary of Financial Capital Investment Co., owner of the Los Angeles Omni Hotel, has its own proposal planned and made a pitch to establish itself as the "stalking horse" bidder.
LVHC wants to revamp the Aladdin into a Far East-themed property to be called Asia.
An attorney for LVHC argued that it had been shut out of the process while Aladdin negotiated with the Planet Hollywood group. Attorney Robert Klyman also objected to the amount by which rival bids had to win.
Attorneys for creditors, the Aladdin, the OpBiz partners and LVHC huddled and negotiated. The end result was the agreement that moved the process ahead.
The Aladdin agreed to withdraw the requirement that the best bid be $17.5 million greater than the OpBiz bid. The creditors agreed to go along with that change. And, LVHC agreed to withdraw its objections as long as it was allowed to negotiate immediately to qualify as a bidder for the property. Negotiations began Wednesday night.
Representatives of LVHC said before going into meetings with Aladdin officials and creditors that they were confident they would be able to convince them that their bid to turn the Aladdin into the Asia hotel-casino would be superior to the Planet Hollywood offer.
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