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Mandalay Bay’s Rumjungle nightclub files for bankruptcy

Updated Wednesday, March 17, 2010 | 1:19 p.m.

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The owner of the Rumjungle nightclub at Mandalay Bay resort in Las Vegas filed for Chapter 11 bankruptcy reorganization Tuesday, saying it needs court protection to prevent Mandalay Bay from shutting it down.

The bankruptcy filing by Rumjungle Las Vegas LLC listed assets of $12 million and liabilities of $1.145 million, including $1.1 million in rent owed to Mandalay Bay -- an amount Rumjungle said is disputed.

Rumjungle, in a statement today, said it's been locked in a legal dispute with the MGM Mirage property over Mandalay Bay's opening of the eyecandy sound lounge, an action Rumjungle says violates its contract allowing it to be the sole nightclub on the property.

Rumjungle said "the unlawful competition from eyecandy and other venues has adversely impacted Rumjungle’s finances.''

A spokesman on Wednesday said MGM Mirage was unable to comment on the issue because it's a matter of pending litigation.

"It is our goal that Rumjungle will remain open and all employees will remain employed while we assert our contractual right to be the sole nightclub at Mandalay Bay," Neil Faggen, manager of Rumjungle, said today in a statement. "With the exception of this dispute, Rumjungle's finances are in good order and we continue to provide a unique and first-class dining and nightclub experience."

"Mandalay Bay has no right to resort to intimidation or threats of closure when we believe it is Mandalay Bay that has violated the nightclub-exclusive provision of our lease agreement," Faggen said in his statement. "Rumjungle has acted in good faith at all times, and we will continue to fight for our employees and valued customers.''

The bankruptcy filing said gross revenue from the club of $16.2 million in 2007 fell to $10 million in 2008 and $6.6 million in 2009 -- though it's unclear how much of that decline was tied to the recession and how much was associated with the dispute with Mandalay Bay.

In a lawsuit filed in District Court for Clark County in September 2008, Rumjungle and Red Square restaurant at Mandalay Bay said that along with China Grill and Red White & Blue restaurants they were "part of a group of entities informally affiliated through common management and ownership" known as the China Grill affiliates.

Rumjungle and Red Square charged in the lawsuit that the relationship between the China Grill affiliates and Mandalay Bay started to sour in June 2004. when MGM Mirage agreed to acquire Mandalay Resort Group, which at that time owned Mandalay Bay.

"This deterioration was due to the new officers' dissatisfaction with being `stuck with' the long-term leases held by the China Grill affiliates and has manifested itself in numerous circumstances where they have refused to abide by the preexisting written agreements embodied in the leases with the China Grill affiliates," the Rumjungle and Red Square lawsuit charged.

But in court papers filed last August, attorneys for MGM Mirage disputed the allegations and said: "Rumjungle and Red Square's claims are barred by its prior material breach of their agreements" and by the statute of frauds.

Trial in that lawsuit is set for later this year, Rumjungle said in its statement Wednesday.

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