Tuesday, Feb. 26, 2002 | 11:10 a.m.
Attorneys for the bankrupt Aladdin hotel-casino have formally proposed selling the Strip property in a court-supervised process.
As early as November, Aladdin officials indicated a sale of the $1.2 billion property, rather than reorganization, would be the likely outcome of the bankruptcy case. Documents filed with U.S. Bankruptcy Court in Las Vegas last week, however, outline the first specific proposal for handling that sale.
"Debtor intends to liquidate in one transaction all property and rights comprising the casino-hotel," the documents state.
The sale process will be virtually identical to that used in the bankruptcy case of the Regent Las Vegas, sold out of bankruptcy in September. The Aladdin would identify one buyer as a "stalking horse," and sign a sale agreement.
Once a stalking horse is found, hopefuls would then have 30 days in which to present counterbids, though the Aladdin and its bankers have the right under the proposed plan to reject any bidder. If counterbidders were approved, a court-supervised auction would be held to determine the winner.
Price wouldn't be the only thing the court would consider in selecting the winner. Under the proposed plan, one factor that could be used to weigh offers is the willingness of the new buyer to retain the Aladdin's employees.
Other factors would include the ability of the buyer to receive a Nevada gaming license, the bidder's financial capabilities and whether a bidder would run into difficulties because of antitrust laws.
When such a plan was used to sell the Regent (now called JW Marriott Las Vegas), the results were less than spectacular. In a market chilled by the events of Sept. 11, no bidders were approved to challenge the $80 million offer by Hotspur Resorts, and the creditors of the Regent took a substantial loss.
But Gerald Gordon, attorney for the Aladdin, said the Aladdin's situation is a drastically different one.
"This is not a Regent situation," Gordon said. "It was running out of money, and had a drop-dead date (to sell). This is not the Regent. There is no provision that requires the property to be sold in this manner."
If an acceptable offer doesn't emerge, the Aladdin could still pursue other options for emerging from bankruptcy, including a reorganization, he said.
The Aladdin's proposed sale plan also gives the resort's bankers a measure of protection by offering them the right of a "credit bid," or making an offer for the Aladdin of up to the amount they are owed. The banks are owed in excess of $400 million.
Selling the Aladdin could take anywhere from six to 18 months, depending on how long it takes a new buyer to get licensed, court documents said.
Park Place Entertainment Corp. has eyed the Aladdin since well before it opened, and under late Chief Executive Arthur Goldberg, it took a one-third position in the Aladdin's high-yield bonds. Park Place has shown less enthusiasm for a possible Aladdin deal under new CEO Tom Gallagher, but it is still seen by many as a possible bidder in an auction.
"It pays, at the right price, for Park Place to get involved," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown, who estimated the Aladdin could fetch $400 million to $450 million at auction. "In many ways, buying the Aladdin would be like buying the Claridge in Atlantic City. They can connect it to their properties, access a greater number of customers, and get a new price point to sell their rooms."
But other major gaming companies can't be ruled out, he said.
"These companies are investors, and they're looking for return on their equity," Zarnett said. "If they see an incremental return, something that adds to their (cash flow) and improves the overall value of their company, it's possible MGM (MIRAGE) would take a look, that Harrah's (Entertainment Inc.) would take a look."
Las Vegas hotel-casino broker David Atwell sees companies like Park Place, MGM MIRAGE and Harrah's as "first-tier" bidders. But he said there's a second tier as well, made up of gaming operators who aren't in the Las Vegas market. Such possible suitors include people like Macau casino tycoon Stanley Ho and South African casino mogul Sol Kerzner, Atwell said.
But there's a third tier as well -- wild card bidders from outside the gaming industry who may jump at a chance to grab a foothold on the Strip.
Atwell represented such a bidder in 1988, when Japanese billionaire Masoa Nangaku outbid a number of Las Vegas players to acquire the Dunes out of bankruptcy.
"There are entities, both domestic and foreign ... who may come out of the blue for a property of this caliber, in this location, with this kind of potential," Atwell said.
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