Hooters casino presses for right to reorganize
VEGAS INC archives
The Hooters casino resort in Las Vegas is disputing charges by its main creditor that the creditor’s foreclosure of the bankrupt property is inevitable.
Hooters bankruptcy facts
In a Friday court filing, Hooters also portrayed creditor Canpartners as an opportunistic investor in distressed debt hoping to profit from the Hooters casino’s misfortunes tied to the global recession.
The 696-room property on Tropicana Avenue, just east of the Las Vegas Strip, filed for Chapter 11 bankruptcy reorganization and protection on Aug. 1 to block a foreclosure threatened by Canpartners Realty Holding Co. IV.
After the bankruptcy, Canpartners, a unit of Los Angeles investment company Canyon Capital Realty Advisors, said the Hooters casino brand had failed in Las Vegas and reorganization efforts are aimed at the unrealistic goal of finding a white knight to bail out Hooters’ investors and to keep existing management in place.
Canpartners also objected to plans by Hooters to hire professionals to seek new funding or a buyer for the company, charging this was a waste of Canpartners’ cash collateral held by Hooters as the property is so deeply underwater it has no chance of successfully reorganizing.
Canpartners says the property is worth just $70 million but is encumbered by debt with a face value of more than $180 million.
Hooters, in its filing on Friday, disputed assertions it’s a foregone conclusion it can’t successfully reorganize.
"Canpartners is stating that it will never agree to any proposal, and therefore, the court should end this proceeding. If one takes this to its logical conclusion, then in every Chapter 11 case, a secured creditor has a veto over the Chapter 11 case. Canpartners knows that this is not the way it works; that it is not a Roman emperor who can decide life and death for others simply by a thumbs up or down," said Hooters ‘ filing by its attorneys with the Las Vegas law firm Gordon Silver.
Hooters disputed Canpartners’ charges it had unnecessarily inflated executives’ salaries, saying its CEO and president, Neil Kiefer and Mike Hessling, respectively, haven’t received salary increases during their five years with the company.
Raises for Chief Operating Officer Gary Gregg and Chief Financial Officer Deborah Pierce were necessary to keep their salaries in line with market numbers, Hooters said.
"In electing to remain with the company, both Mr. Gregg and Ms. Pierce forfeited employment offers at substantially higher salaries," Hooters’ filing said.
Hooters said business is picking up for the property after revenue tumbled during the recession, with EBITDA of $4.68 million in the seven months ending July 31 improving by $1.5 million compared to the same period of 2010.
EBITDA, a key financial measure for casinos, means earnings before interest, taxes, depreciation and amortization.
This, among other reasons, is why Hooters should be able to use the bankruptcy process to seek new value for the company rather than simply turn the keys over to Canpartners, Hooters said.
"Consistent with the basic principles of the Bankruptcy Code, debtors are entitled to ascertain whether the marketplace reveals any prospective investors," the company’s filing said.
The company also said that Canpartners picked up a big chunk of Hooters’ debt – $127.5 million of its senior secured notes -- for just $28.3 million, or 22 cents on the dollar in October
This was done while Canpartners was "fully aware of the distressed financial state of the debtors," Hooters said in his filing.
Bankruptcy Judge Bruce Markell in Las Vegas plans hearings in November on whether Hooters can continue to use Canpartners’ cash collateral as Hooters tries to reorganize.