Thursday, July 15, 1999 | 10:32 a.m.
Cash-strapped Las Vegas Entertainment Network Inc. has been bailed out by a consortium of wealthy investors, who have purchased 53 percent control of the company for $305 million.
The price paid by the six anonymous trusts is equal to $101.60 per share -- a $100.29 premium on LVEN's closing price Wednesday. The 3 million shares can't be sold for at least three years.
"These are very wealthy individuals," LVEN spokesman Jay Goldberg said. "They're interested in the long-term results."
The purchase was approved recently by a shareholder vote. LVEN is based in Los Angeles.
A small chunk of the funds, $5.5 million, will be used to acquire a 50 percent stake in Sulmatic Administradore De Bens Ltd., a Brazilian gaming company. The remainder will be used "for the company's expansion," said a release issued this morning.
For LVEN, the funding couldn't have come at a more opportune time. The company was down to just $90,000 in cash as of April 30, and had a cash burn rate of $50,000 to $75,000 per month.
Some of the funds will be used for the expansion of Sulmatic machines both in Brazil and worldwide, Goldberg said. Sulmatic now has 1,200 machines installed, but the company is looking at installing 50,000 machines worldwide over the next two years. That many machines would generate $500 million in annual cash flow, Goldberg said.
But another potential use of the funds may be the defunct El Rancho hotel property on the Strip. LVEN is currently marketing that property and says it is close to selling the property to a partner.
In a recent filing with the Securities and Exchange Commission, LVEN said a company called Countryland USA Inc. was in the final stages of negotiating a purchase of the property. That company has lined up $354 million to renovate the property, the filing indicated. The purchase price wasn't disclosed.
Goldberg identified Countryland USA as a "partner company," and said LVEN may contribute some of the costs of renovation. The deal is expected to close by the end of July.
Countryland USA is separate from Countryland Properties, an LVEN subsidiary dissolved earlier this year. It was incorporated in Nevada in November, and secretary of state records indicate its president and sole officer is David K. Howington. No further information was available on the company.
The El Rancho property is owned by International Thoroughbred Breeders Inc., a defunct Cherry Hill, N.J., company. LVEN is marketing the property on ITB's behalf and will receive a portion of the sale price if the Countryland sale closes.
ITB acquired the El Rancho property in 1996 from LVEN for $43.5 million, plus a portion of cash flow from any future project. In 1997 LVEN accepted 2.09 million shares of ITB stock as payment for $11.6 million owed by ITB in connection with the El Rancho purchase.
That exchange led to a lawsuit by ITB shareholders in October 1997. Last July, ITB and LVEN reached a settlement where those shares were returned to ITB.
As part of that settlement, LVEN gained the right to sell the El Rancho project itself and pocket "excess sales proceeds." LVEN also has the right under the agreement to purchase the property itself. That agreement expired April 19, but LVEN said it has signed a letter agreement with Countryland to be "compensated with a cash fee" for the El Rancho sale.
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