Tuesday, Jan. 28, 1997 | 11:59 a.m.
When the wheels fell off the roller coaster atop the 1,149-foot Stratosphere Tower, could bankruptcy have been far behind?
That question was answered Monday, about a month after the derailment -- the latest in a string of bad luck and poor showings for the 8-month-old resort -- when the Stratosphere Corp. filed for bankruptcy protection.
The troubled hotel-casino, co-founded by longtime Las Vegas casino owner Bob Stupak, who was ousted shortly after the resort opened, is likely to go the Chapter 11 route in an effort to turn around its ill fortune.
Resort officials for months have said the property would likely file for bankruptcy reorganization after failing to make interest payments on its $203 million in first mortgage notes.
Hotel officials say they hope the bankruptcy filing will have no effect on business, which they said has been so good lately that more employees are being hired. The resort employs about 2,800 people.
Still, that is little comfort to stockholders who have seen their investment dwindle to nothing. The stock currently is almost worthless, selling this morning for 72 cents a share. It originally sold for $10 a share and, at its high point, sold for $14 a share.
Under the bankruptcy plan, all of Stratosphere's current stock will be canceled. Shareholders, in place of each share they own, will receive the right to buy stock in the restructured corporation at $1.31 a share.
They also will receive warrants good for three years allowing them to buy half a share in the new company at $3 a share.
The resort, which opened April 29, has not performed up to expectations, prompting a decision in August to stop construction on an unfinished hotel tower and other parts of the resort.
Industry observers blame the hotel's location on Las Vegas Boulevard north of Sahara Avenue -- technically not on the Strip -- and its failure to properly market itself for the financial woes.
A new gaming policy introduced in October, however, has drawn business to the hotel, which said it had cash flow of $2.7 million in October and $2.5 million in November.
The new gaming policy has drawn more people in by offering a 98 percent return on all 41 slot machines, more than 100 percent return on 102 video poker machines and 100 times odds on craps.
"We think from an operations standpoint Stratosphere has seen its worst days," said Grand Casinos Chairman Lyle Berman, whose company holds a majority interest -- 42 percent -- in the resort.
"If there was a mistake, the biggest mistake was not opening with more rooms."
In addition, the company has liabilities of $353 million, including $228 million in long-term debt and $50 million it owes to Grand Casinos Inc.
The property offered many gimmicks at its opening, including the High Roller roller coaster, which was heralded as a great thrill ride by the resort, and ridiculed by others as a disaster waiting to happen.
Twice, incidents occurred that caused potential riders -- and therefore potential visitors -- to perhaps shy away.
In late December, two wheels fell off the roller coaster, bringing it to an abrupt halt. It was repaired, reinspected and back in operation 4 1/2 hours later.
Last May, safety inspectors cleared Stratosphere Corp. to resume operation of the High Roller after a malfunction shut it down for nearly 24 hours.
Officials said that incident was triggered by a tension cylinder on one of 15 motors used to propel cars breaking off and falling to an outdoor observation deck, cracking a safety glass window on the 109th floor.