Icahn sells Charlie's interest to Station

Carl Icahn has ended his quest to take over Arizona Charlie's Hotel and Casino.

The billionaire agreed Friday to sell his share of Arizona Charlie's mortgage debt to Station Casinos, effectively abandoning his bid for control of the bankrupt Decatur Boulevard resort.

The deal lets Station replace Icahn in an agreement reached earlier last week between Icahn and Becker Gaming, Arizona Charlie's owner.

"We've agreed to let Station take over our spot," Ed Weisfelner, an Icahn attorney, said.

But if that earlier agreement is approved, as Becker insists is likely, Becker will retain control of the resort.

Station officials declined comment, but the locals casino operator is clearly interested in the resort, analysts say.

"Obviously, they want it badly," Bruce Turner, an analyst with Salomon Smith Barney in New York, said. "They're serious about it."

Arizona Charlie's would fill a geographic gap in Station's portfolio of locals casinos. In the Las Vegas area, Station owns casinos in North Las Vegas, near the Strip, on the Boulder Highway and in Henderson. Arizona Charlie's is the westernmost locals' hotel-casino in Las Vegas.

"I think for them it's mostly about geographic dispersion," Turner said. "It would allow them to fill in another spot, geographically."

An Arizona Charlie's takeover would also eliminate a competitor, Turner noted.

Arizona Charlie's -- a 258-room hotel-casino catering primarily to locals -- declared bankruptcy in November after a plan to operate a Missouri riverboat went sour. Arizona Charlie's had guaranteed bonds to finance the riverboat. At that time, Arizona Charlie's declared $55 million in mortgage debt and about $30 million in debts to other creditors.

Icahn bought a majority share of the resort's mortgage debt last summer. Icahn used a similar debt-buying strategy to gain control of the Stratosphere hotel-casino when that property was in bankruptcy.

Under Friday's agreement, Station will pay Icahn about $31.6 million for Icahn's 51 percent stake in Arizona Charlie's mortgage debt notes.

Station also will pay Icahn the $1.5 million that Becker had already agreed to pay to cover the billionaire's attorney's fees. That payment was negotiated between Icahn and Becker long before last week's agreements.

"Carl's gone out of pocket for fees and expenses for lawyers and experts," Weisfelner said.

Bankruptcy law allows a creditor who makes a "significant contribution" to a case to recover attorney fees, Weisfelner explained.

The agreement Icahn reached with Becker earlier last week gives Becker until July 31 to pay Arizona Charlie's mortgage debtholders -- including Icahn -- pro-rated shares of $61.6 million. Other Arizona Charlie's creditors will receive about $7.6 million. If Becker were to miss the deadline, control of the resort would have reverted to Icahn.

Under Icahn's agreement with Station, Station will now take Icahn's place in the earlier agreement. That is, if Becker does not procure its financing by July 31, Station, not Icahn, will take control of the property.

Becker is about to receive a $95 million loan from United Healthcare Financial Services LLC of Santa Monica, Calif., according to Becker's attorneys and loan documents provided by the company. The loan will pay Arizona Charlie's creditors and fund the expansion of the resort's casino, parking facilities and food service.

United Healthcare based the loan amount on an appraisal that found Arizona Charlie's would be worth $110 million after the expansion, and on its determination that Arizona Charlie's net operating income -- its profit -- would be $20 million per year after the hotel-casino is expanded.

In the minds of Becker Chief Executive Bruce Becker and his lead attorney, John Clemency, the deal between Icahn and Station is inconsequential. Becker will get its financing, they reason, and therefore it doesn't matter who owns the debt.

"Station simply wants to have a backup position, which we fully believe will never materialize," Clemency said.

The Friday agreement means all three of the parties that were once vying for control of Arizona Charlie's -- Becker, Icahn and Station -- have reached full agreement. As a result, bankruptcy court hearings scheduled for this week should go smoothly, Clemency said.

"It means we're going to get confirmed on Thursday," Clemency said, "and shortly thereafter we will perform on the financing option."

Confirmation is the process in which a bankruptcy judge reviews and approves or denies the reorganization plans that have been proposed for a company. When there were three competing proposals, the Arizona Charlie's confirmation process was expected to be lively and lengthy. Now that all three parties have agreed on a single plan, that plan should be approved quickly.

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