Goldman Sachs, partner in deal to buy LVH hotel-casino
29 August 2012
29 Aug. 2012 8:30 p.m.
The operator of the LVH hotel-casino in Las Vegas today said its chief creditor and a partner intend to buy it out of foreclosure in November and then continue operations.
LVH workers today received a WARN ACT notice under the Worker Adjustment and Retraining Notification Act. Such notices are typically issued to warn of layoffs or a planned business closure.
But LVH spokesman Kurt Ouchida said the WARN Act notice in this case is only notifying employees and union representatives of the upcoming foreclosure sale.
"In many ways this is good news for everyone at the LVH as it will soon provide more clarity to the future direction of the property," he said. "It is important to note that the foreclosure sales process takes time and unfortunately many assume that a 'foreclosure' means that the property is closing its doors. That does not appear to be the case at the LVH."
A court-appointed receiver, Ronald Paul Johnson, has been running the property under an agreement reached in January between its owners, investment company Colony Capital LLC and investment bank Goldman Sachs, and its main lender, which is also Goldman Sachs. That agreement contemplated that the property would be foreclosed on after defaulting on its $252 million mortgage.
The deal was reached during court proceedings where it was claimed by Colony Capital that Goldman Sachs wanted to acquire LVH and then coordinate LVH operations with those of the Las Vegas-based gaming company it owns, American Casino & Entertainment Properties LLC, owner of the Stratosphere and three other gaming properties in Las Vegas and Laughlin. Goldman Sachs attorneys denied those assertions at the time.
"A joint venture has been formed between Gramercy Capital and Goldman Sachs Mortgage Company LLC, the current lender of the property, who intends to bid at the foreclosure sale in early November (the exact day has yet to be determined)," Ouchida said in a statement Wednesday.
A Gramercy unit was identified during the litigation as the servicer of the LVH loan.
"We believe it is likely that this joint venture will be the successful bidder of the property and, if so, they intend to continue operations at LVH," Ouchida said.
"As it stands, Gramercy and Goldman have entered into a preliminary agreement with the Navegante Group, a well-known casino management company, which is working closely with state and county regulators to process licensing applications in order to be available as a licensed operator of the property should this be necessary. By way of these actions and on behalf of the lenders who want to achieve what is in the best interest of this community and the employees of the LVH, the Navegante Group will be prepared for the outcome of the foreclosure sale," Ouchida said.
"Although no one can guarantee the outcome of the foreclosure sales auction, the LVH is in the process of preparing paperwork necessary to transfer employees from the old company to the new one, assuming the joint venture of Gramercy and Goldman is successful in acquiring the assets of the property," he said.
"Since entering the foreclosure process in September 2011, the LVH has continued to conduct business as usual. We have booked group and convention business for 2013 and beyond and will be providing the same excellent service and value experience to all of our guests and group customers without fail. We will do everything in our power to make the transition of the impending foreclosure sale as smooth as possible," Ouchida said in his statement.
The LVH on Paradise Road has 2,950 rooms.
Business has slumped at the LVH — formerly the Las Vegas Hilton — during the recession. And it's continued to suffer after losing its right to use the Hilton name under a franchise agreement.
Staff was trimmed at the LVH this summer as revenue failed to meet expectations.
In his most recent financial report to the court, Johnson said the LVH lost $2.485 million in July on an EBITDA basis as net revenue came in at $10.275 million.
Net revenue was down 24.6 percent from what had been budgeted.
EBITDA means earnings before interest, taxes, depreciation and amortization.
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