The Las Vegas Monorail confirmed Monday it would work on a new plan of reorganization to emerge from bankruptcy following the rejection last week of its latest proposal.
On Friday, Bankruptcy Judge Bruce Markell denied confirmation of a plan that would have left the system encumbered with $44.5 million in debt. With that much debt, Markell said, the system's own financial projections showed it would be doomed to financial failure by 2019.
Creditors, even after seeing $663 million of their debt claims extinguished under the plan, had supported it because their $44.5 million recovery as the holder of the new debt would be far more than the estimated $8.5 million the monorail would fetch in a liquidation scenario.
Markell, however, found the creditors' support unconvincing.
"Its plan seeks to saddle LVMC (the monorail company) with debt more than twice its value (estmated at $16 to $20 million)," Markell wrote in his order. "Its financial expert projects accounting losses of not less than $15 million each year for the next seven years. Its management acknowledges that the plan underfunds LVMC’s needs by $38.4 million over that same period. For these and other reasons, its current plan dooms it to failure, if not in the next few years, certainly by 2019. Its plan is thus not feasible, and thus the strong creditor support it has garnered is largely irrelevant."
In a statement Monday, Las Vegas Monorail Co. CEO Curtis Myles didn't offer any hints as to whether bondholders holding the system's debt would be asked to take deeper losses in the revised reorganization plan.
Based on Myles' testimony during a hearing last week and Markell's concerns, the next version of the plan is expected to include a lot more detail on the potential financial benefit of three upside scenarios the monorail has offfered: picking up more passengers with the opening of Project Linq, boosting ridership with the possible reopening of the Sahara and the potential receipt of millions of dollars in federal grants to help the operation cover its costs.
"We are disappointed by Judge Bruce Markell's decision, especially in light of the fact that the plan received overwhelming creditor support. However, we have reviewed Judge Markell's order and will be discussing it with our creditors as we go forward to formulate and file with the court a revised plan of reorganization," said a monorail statement issued by Myles. "As we work through this process, the Las Vegas Monorail Co. will continue to provide significant public benefits. By carrying millions of passengers each year, the system reduces congestion and improves air quality in our community, while continuing to cover operational costs and produce net operating revenues."