Las Vegas Monorail Receives Court Approval to Seek Bankruptcy Plan Vote
By Steven Church – Mar 8, 2012 12:01 AM ET
Las Vegas Monorail Co., which runs a driverless transport system for casino patrons, won a judge’s permission to seek a creditor vote on a bankruptcy exit plan that would pay bondholders $13 million of the $451.4 million they are owed.
U.S. Bankruptcy Judge Bruce A. Markell in Las Vegas said yesterday he would approve a disclosure statement for the plan that gives creditors details about how their debts will be handled. Lower-ranking bondholders owed $207.2 million will get nothing under the proposal.
This is Las Vegas Monorail’s second attempt to win approval for a reorganization plan. Markell rejected the first plan in November, finding it wasn’t economically feasible, in part because it proposed paying bondholders $44.5 million by issuing new debt.
“We heard what the court said,” Monorail attorney Gerald Gordon said in court yesterday.
Las Vegas Monorail is trying to get out of bankruptcy and pursue an expansion plan as Las Vegas recovers from its steepest gambling and convention decline, casino operators such as MGM Resorts International (MGM) and Caesars Entertainment Corp. (CZR) have said. Proceeds for casinos on the Strip climbed 5.1 percent last year and 4.1 percent in 2010, after record declines of more than 9 percent in 2008 and 2009.
Markell found that the last plan was unrealistic because Monorail couldn’t afford the debt it was taking on to pay bondholders, according to court documents. He was also critical of the 10 percent interest rate on that debt.
The new plan pays bondholders with $13 million in new debt that carries a lower interest rate. Should revenues rise above a certain level, bondholders would share in the extra money, according to the proposed plan.
Las Vegas Monorail’s 3.9 mile track runs from near the Las Vegas Strip to the convention center and carries passengers between gambling resorts. One of those resorts, the Sahara Hotel, closed last year, causing ridership to drop and a loss of about $800,000 in fares for the second half of 2011, Monorail said in court papers.
The company said its new plan may make it eligible to win grants to upgrade and expand the system, perhaps eventually linking the Strip with Las Vegas’s McCarran International Airport.
Markell said he would sign an order allowing the vote after final, minor wording changes were made. He scheduled an April 30 hearing to decide whether to approve the plan once creditors vote. Under the U.S. Bankruptcy Code, Markell will take the tally into consideration.
A revenue bond issued in 2000 for the Las Vegas Monorail project due in January 2032 traded yesterday at an average of 22.67 cents on the dollar, up from an average of 19.65 cents on Nov. 21, three days after Markell rejected the first reorganization plan, according to data compiled by Bloomberg.
The case is In re Las Vegas Monorail, 10-10464, U.S. Bankruptcy Court, District of Nevada (Las Vegas).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at firstname.lastname@example.org