Wednesday, Jan. 6, 2010 | 9:06 a.m.
The economic downturn and heightened competition have pushed a Las Vegas topless dancing club into bankruptcy.
The owner of Sheri's Cabaret, 2580 S. Highland Drive, filed for Chapter 11 reorganization last month and has proposed to reorganize by temporarily lowering its mortgage payments to two banks.
Owner Sutter Street Investments LLC filed for reorganization Dec. 21. A sister company that owns the Sheri's building, Highland Street Group LLC, had filed for bankruptcy on Sept. 22.
David Frank, manager of Resort Entertainment Companies LLC, a Las Vegas company that manages Sutter Street, said in a court filing that Sheri's has been operating since 2003 and in 2005 agreed to pay rent to Highland of $30,000 per month.
"The debtor’s operation of the cabaret business was successful for the first four years of its operation. However, as a result of the current economic downturn and increasingly aggressive competition in the cabaret industry, business during the past two years has been slow and revenues have been reduced. This has resulted in reduced customer traffic and the debtor’s profitability has decreased," Frank said in his filing. "However, the debtor’s obligations have remained the same or have increased. With its current revenues the debtor is still able to meet most its financial obligations, with the exception of its monthly rent to Highland and certain other large non-recurring obligations.
He said in his filing that Sheri's generates $20,000 to $26,000 per week in gross income and that it has 17 employees -- not counting exotic dancers who are independent contractors.
The employees earn from $7.55 to $25 per hour in jobs including management, bartenders, servers and security, Frank's court filing said.
In its bankruptcy filing, Highland Street listed assets of $8.159 million including $8.1 million for its real estate. Its liabilities totaled $5.822 million.
Highland Street has proposed to reorganize by temporarily reducing payments to mortgage holders City National Bank, owed $3.5 million; and Bank of Nevada, owed $348,000.
The reorganization plan calls for interest-only payments to City National of 2 percent for one year, to be stepped up to 3 percent and 4 percent in the following years. After three years, Highland Street proposes to pay off the mortgage over 25 years at 4.25 percent.
Bank of Nevada's loan would be paid based on the same terms.
Insiders that made loans to Highland Street totaling $1.7 million would receive no payments, but their claims would be preserved and potentially paid should the business be sold, the reorganization plan says.
The insiders include some of the owners of the club including Frank, of Woodland Hills, Calif., owed $448,000; and Merlin's Highland LLC of Las Vegas, owed $1.1 million.
Creditors of Sheri's and Highland Street have not yet filed their responses to the reorganization plan, which was proposed Dec. 21.