Friday, Dec. 22, 2000 | 10:49 a.m.
Vacation Village Inc., which filed for bankruptcy protection after it was sued for allegedly defaulting on a $19 million one-year loan from a Wells Fargo bank subsidiary, blamed its financial troubles on refinancing plans it claimed "didn't come through."
Vacation Village President Tim Heers said at a creditors meeting Wednesday that two mortgage brokers reneged on a deal to obtain financing to help pay off a loan. The two brokers had earlier helped Vacation Village obtain the loan from Foothill Capital Corp. to acquire the hotel-casino.
Heers acquired Vacation Village in 1999. Previously, he had been leasing the property from CEH Properties Ltd., a company owned by his father, Carol Dean Heers.
Foothill, a Los Angeles loan company, sued Vacation Village, affiliate Shangri La Ltd. and five individuals it identified as general partners of Shangri La on Oct. 24, alleging they failed to repay a one-year loan of $19 million at an interest rate of 14 percent when it came due Sept. 14. Foothill said $19.35 million was due Oct. 23.
"Remington Financial of Phoenix and Financial Solutions of New York are two mortgage brokers that took us to Foothill a year ago, and got us the $19 million loan," Heers said. "Remington told us if we put up a $35,000 deposit through them to a potential lender called Mee Corp., we would get an extension on our $19 million loan and a new loan through Mee Corp. But they lied. They didn't come through with the new loan."
But Scott Fleming, Foothill's attorney, disputed Vacation Village's charges.
"The brokers aren't affiliated with Foothill and we aren't aware of any agreements to extend the loan repayment," he said. "Foothill, in order to get repaid, provided some names of financing sources to assist Vacation Village get new financing."
Fleming said Vacation Village's bankruptcy filing represents a second attempt by the five principals of Vacation Village Inc., who are also partners of CEH, to reorganize the company's finances. CEH filed for Chapter 11 bankruptcy on Oct. 7, 1997.
A Las Vegas gaming analyst said he also doubted Vacation Village's claims.
"Companies don't go into bankruptcy unless they're running out of money," said Dave Ehlers, chairman of Las Vegas Investment Advisors Inc. "The Vacation Village management must have either improperly capitalized or financed the deal or made mistakes. One or more of these mistakes may have occurred in this present case.
"Competition is good," he said. "The facilities at Station Casinos, Coast Resorts and the new Terrible's casino are excellent. If local players are going to other casinos other than Vacation Village, again, it just boils down to management. They should have recognized earlier what the local player wanted."
William McGimsey, Vacation Village's attorney, said the company is current on payments of other secured debts, taxes and operational expenses since its Chapter 11 filing and expects to file a refinancing plan within 120 days.
Cheryl Nolte, Vacation Village's vice president, said the hotel-casino received offers for a new loan of up to $27 million to pay off Foothill's loan and to upgrade the property to become a Holiday Inn franchise hotel. She said other options also considered include joint venture agreements and possibly a sale of the property "if the price is right."
Vacation Village received court approval on Monday to use the hotel-casino's cash collateral for its operations within an agreed monthly budget of $1.067 million for up to 45 days. Both parties have the option to renew the agreement after that period.
Vacation Village in turn agreed to provide weekly financial reports and protect Foothill's cash collateral by providing replacement liens on the hotel-casino's future earnings to replace cash that has been spent since the bankruptcy filing.