Green Valley Ranch hotel-casino in Henderson says certain lenders are improperly scheming to gain a payout in its bankruptcy case and should be removed from the case’s unsecured creditors committee.
The lenders this week asked U.S. Bankruptcy Judge Gregg Zive in Reno to delay confirmation of the reorganization plan for Green Valley Ranch Resort in which affiliates of the Fertitta family agreed in March buy the property for $500 million – keeping it within the Station Casinos family.
The lenders charged the bidding for the property was rigged to favor the Fertitta insiders and that the Green Valley Ranch Resort creditors should receive more than $500 million.
Attorneys for property owner Green Valley Ranch Gaming LLC fired back Wednesday, saying the second-lien lenders doing the complaining are contractually prohibited from challenging the deal.
That’s because first-lien lenders that agreed to the reorganization plan hold about 60 percent of the second-lien debt, Green Valley Ranch Gaming attorneys said.
"Yet three second lien lenders (MFS Investment Management, Panton Capital Group and Babson Capital Management LLC), wish to engage in a classic strategy -- played out in front of this and other bankruptcy courts countless times before -- to raise doubts about the Green Valley Ranch sale and in an effort to create hold-up value,’’ Green Valley Ranch Resort attorneys said in their filing.
Their filing said that under the sale proposal, first-lien lenders almost unanimously consented to receive $106 million less than full payment on their first-lien debt.
In all, debt of $378 million would be extinguished under the plan.
"Because the general unsecured creditors are $378 million ‘out of the money,’ there will be no value to them unless the (creditors) committee can show that the independent sale process somehow undervalued the estate by approximately 70 percent and that there is a willing buyer at that price,’’ the filing said.
The lenders were appointed to the creditors committee by the U.S. Trustee’s office, which is part of the U.S. Justice Department and oversees the administration of bankruptcy cases.
Green Valley Ranch Gaming LLC is a partnership of Station Casinos Inc. and the Greenspun family, owner of the Las Vegas Sun and its sister publication VEGAS INC. The Greenspun affiliates will receive licensing revenue for the Green Valley Ranch trademark under the reorganization plan.
An attorney for the lenders filed court papers Wednesday indicating they want to look into this trademark royalty arrangement as well as plans by affiliates of the Fertittas to manage Green Valley Ranch after the bankruptcy.
"The Official Committee (of creditors) believes inquiry must be made into the retention of potentially significant value and benefits by insider equity holders of Green Valley Ranch when unsecured creditors under the plan are slated to receive nothing on account of their claims,’’ said the filing by an attorney representing the dissident lenders. They’ve also alleged past mismanagement at the property hurt its financial results and want to look into other transactions they claim resulted in "broad releases of significant claims against insiders.’’
Despite their assertions that Green Valley Ranch Resort is undervalued in part because of improving conditions in its market serving both locals and visitors, Green Valley Ranch Resort said in court papers its loss from operations was $14.7 million in the first quarter.
That’s on top of losses of $91.9 million in 2010 and $17.5 million in 2009. These losses have been attributed to the recession as well as new competition from the M Resort.
Green Valley Ranch resort has 495 hotel rooms, 2,407 slot machines and 48 table games. In its latest bankruptcy filing, its assets are valued at $482 million against liabilities of $895 million.
This is not the first time the Fertittas and Station Casinos have dealt with dissident lenders. In the main Station Casinos bankruptcy case, bondholders owed $2.8 billion dropped their protests and settled with Station last summer – a development that helped clear the way for approval of the main Station Casinos bankruptcy case in which the Fertittas and their lenders will maintain control of the vast majority of the company’s properties.
Another Greenspun-Fertitta partnership, Aliante Station hotel-casino in North Las Vegas, is to be spun off to lenders as part of its bankruptcy.
Zive hasn’t indicated when he’ll rule on the motion that the Green Valley Ranch sale process be delayed; and Green Valley Ranch’s competing motion that the complaining lenders be removed from the creditors committee.