Lender: Operator lined up if Hard Rock Hotel enters foreclosure

By Steve Green

Published Thursday, Feb. 3, 2011 | 9:11 a.m.

Updated Thursday, Feb. 3, 2011 | 1:42 p.m.

The lender trying to foreclose on the Las Vegas Hard Rock hotel-casino says it expects to receive regulatory approval for the foreclosure and -- if it forecloses -- it has lined up the Navegante Group of Las Vegas to run the property.

These assertions were made Thursday by an attorney for NorthStar Realty Finance Corp. in a New York Supreme Court filing.

NorthStar was sued Tuesday by the owners of the Las Vegas Hard Rock after NorthStar on Jan. 28 disclosed plans to foreclose on Feb. 7.

The Las Vegas Hard Rock in its lawsuit disputed assertions by NorthStar that it's in default on a $96.2 million loan from NorthStar and charged the foreclosure on five business days' notice was not commercially reasonable as it takes months to sell a major hotel-casino. The Las Vegas Hard Rock also said the foreclosure couldn't happen because it would require the prior approval of the Nevada Gaming Commission.

But Thursday's court filing by NorthStar said a foreclosure is the only way NorthStar can protect its interests as a restructuring of the Hard Rock's $1.36 billion in debt may leave NorthStar unpaid. Feb. 9 is the maturity date for $1.25 billion in Hard Rock debt and the Hard Rock has not yet disclosed plans to deal with that debt such as restructuring it or extending it.

NorthStar said it intends to obtain approval of gaming regulators for the foreclosure, has lined up experienced contract operator Navegante to run the gaming and hotel at the Hard Rock and is now marketing the Paradise Road property for sale to some 160 potential buyers and investors. NorthStar also hired Global Gaming & Hospitality LLC to publicize the foreclosure and contact would-be buyers.

"The (Hard Rock) borrowers and their indirect subsidiaries ... are insolvent," NorthStar charged in Thursday's court filing.

NorthStar "is seeking to protect its right to maximize the recovery on its loan now because on Feb. 9 it loses its leverage at the bargaining table and probably any hope of getting any recovery on the $95 million (plus) the borrowers owe on NorthStar's loan," NorthStar said in Thursday's court filing.

NorthStar also asserted in Thursday's filing that if the New York state court blocks the foreclosure, the Hard Rock should be required to post a $95 million bond to cover NorthStar's potential damages.

On Thursday afternoon, the Las Vegas Hard Rock issued its first public statement about the dispute with NorthStar.

"We believe that prior to the (lender) commencing with the (foreclosure) auction, the (lender) must be approved by the Nevada Gaming Commission as a beneficial owner of the equity of a registered holding company, among other requirements that must also be met. The company is contesting the foreclosure and public auction on a variety of bases," the Las Vegas Hard Rock said in a Securities and Exchange Commission filing.