Slowdown may force banks to move against Aladdin and best online casino singapore



The Las Vegas Strip’s $1.2 billion Aladdin hotel-casino was in a difficult financial position one week ago today — Sept. 11, 2001.


Now, with the entire Las Vegas gaming industry facing a tough road ahead in the wake of last Tuesday’s terror strikes, the picture for the Aladdin has become immeasurably more difficult, observers say.


“I would say it (an Aladdin bankruptcy) is highly likely by the end of the year,” said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown.


Others believe the Aladdin still has a chance — but that chance lies entirely with the Aladdin’s bankers, led by the Bank of Nova Scotia.


“The ball’s in the (lenders’) court right now,” said Larry Klatzkin, gaming analyst with Jeffries & Co. “They can force a Chapter 11 (bankruptcy) any time they want.”


The Aladdin’s precarious financial position was spelled out by its latest quarterly report, filed last month. Cash flow had continuously fallen short of the levels needed to make interest payments on its $700 million debt load. The Aladdin had been in discussions with its banks to restructure the payment schedule on its bank debt — a move that would have saved the property nearly $18 million in interest payments through next September.


Majority Aladdin owner Sommer Trust withdrew its support for the agreement, forcing minority owner London Clubs International to try to negotiate the deal with the Aladdin’s banks alone. When this deal was not finalized by Aug. 28 — and Sommer and LCI failed to make an $8 million “keep-well” payment to the Aladdin — the Aladdin went into technical default on its debt.


That technical default became an actual one on Sept. 3, when the Aladdin failed to make a $4.25 million payment to its lease financing creditors. That payment apparently has still not been made, though talks with the banks have been continuing.


The Aladdin said in its quarterly report it needed more cash from Sommer and LCI by Sept. 15 to stay liquid. But Sommer has no cash to provide, the company said, and LCI’s bankers refuse to let the London casino operator put up any more cash unless the amended credit agreement takes effect.


The Aladdin’s negotiations with its bankers have been disrupted by the terrorist attacks and their aftermath. But when those talks resume, Zarnett believes the banks may have little appetite to continue. That’s because the Aladdin, like all other Strip properties, almost certainly faces a slowdown over the next several months — and that does not create confidence among lenders that the Aladdin’s cash flow will improve to best online casino singapore .


The Aladdin has been taking measures to control costs — this week, it has reduced the workweek of several hundred of its employees from five days to four. Future reductions will be taken as business conditions warrant.


But while these steps can help, the Aladdin’s fate still lies almost entirely in the hands of the bankers. Klatzkin said it’s difficult to tell whether the banks will still be willing togo along.


“Without a bank deal, they would have to file Chapter 11 (bankruptcy), even without this crisis,” Klatzkin said. “It might still be tight, even with the bank deal.”


Zarnett once believed the deal would be able to stave off bankruptcy for a year. Now, he believes it’s a moot point.


“The effect (of the expected slowdown) will make it very difficult for the Aladdin to meet even their revised payment schedule,” Zarnett said. “That will most likely force the banks to act sooner, rather than later.


“(The banks) were hoping they could make some adjustments, help it through its first year … but clearly, this tragedy and its effect on air travel throughout the U.S., coupled with recessionary pressures, will leave very little room for the Aladdin to make even its revised payment schedule.”


But the Aladdin may still have one advantage, Klatzkin believes. That’s because the Aladdin’s main creditor, the Bank of Nova Scotia, is also the lead creditor to LCI. And an Aladdin bankruptcy could force LCI’s bankruptcy as well.


“The lead banker may have more interest in keeping this alive than (if it) was the Aladdin isolated,” Klatzkin said.


LCI has been trying to take a majority position in the Aladdin’s stock from the Sommer Trust, then sell this majority position to a third party. If the Aladdin fell into bankruptcy instead, a court-supervised sale would also be quite likely.


“I think people will be interested (in buying the Aladdin),” Zarnett said. “The question is, will the bankruptcy court be able to get prices they can accept, or will they be forced to wait a little while until normal market conditions resume?


“So far, it’s hard to determine what normal is. A market dependent on fly-in customers is experiencing significant declines because of what happened last week.”