A federal judge selected a joint venture involving Planet Hollywood’s co-founder and the Starwood hotel chain to buy the bankrupt Aladdin hotel-casino on the Las Vegas Strip.
U.S. Bankruptcy Judge Robert C. Jones on Friday chose OpBiz, a partnership that includes Starwood Hotels & Resorts, Bay Harbour Management and Planet Hollywood CEO Robert Earl, because the group had the backing of secured and unsecured creditors.
“It boils down to a not so difficult a decision,” Jones said. “The bottom line is what the constituency groups want.”
The judge’s decision ended an 18-month process that included a frenzy of last-minute negotiations between bidders and creditors during a standing-room only purchasing hearing in U.S. Bankruptcy Court.
Three parties attempted to compete with OpBiz for the Aladdin during Friday’s proceedings, but none had all the requisite pieces of a deal in place, especially all-important financing.
Aladdin lenders concluded that OpBiz had the total package. It was the “bird in hand” that the judge wasn’t willing to risk getting away, he said.
OpBiz has been in talks with the Aladdin for about eight months, and was named the stalking horse, or lead bidder, in the bankruptcy case in May.
OpBiz intends to assume $510 million of Aladdin debt and other liabilities. OpBiz will invest $90 million over three years in the 2,567-room hotel-casino and keep all of its employees.
The Arabian Nights-themed resort will be renamed Planet Hollywood Hotel & Casino. Starwood, the sixth largest hotelier in the nation, will manage the hotel through its upscale Sheraton brand. It will receive 4 percent of revenues plus expenses, and give the hotel chain a coveted spot on the Strip for its preferred club members to redeem and earn points.
“This is the one of the world’s greatest hotel markets,” Joseph D. Long, Starwood senior vice president of acquisitions and development, said after the hearing. “It was the number one target market for us.”
Earl could not say how long it would take to transform the Aladdin. OpBiz still must obtain a state gambling license, and Jones must approve plans for the makeover when they are completed.
Aladdin lawyer William Noall said it could take until March 2004 before Earl completes a deal with his lenders and the Aladdin emerges from bankruptcy under new ownership.
The $1.4 billion Aladdin opened in August 2000 and filed for Chapter 11 protection about a year later. The Aladdin owes unsecured and secured creditors more than $588 million.
There were clearly some disappointed parties after the judge tapped OpBiz. One of those was Marriott International and Los Angeles-based Financial Capital Investment Co.
Marriott had joined with Financial Capital to offer a competing bid of $517.5 million during the hearing but hadn’t cemented its management deal.
Robert Alter, managing director of Financial Capital, said he remained committed to finding a viable project in Las Vegas.
The California-based Meruelo Group also made a cash bid of $530 million, but its financing was questioned.
“You have made a higher cash offer,” the judge said. “The problem is we have a substantial risk.”
Barron Gaming made a $475 million offer before the hearing but demonstrated no funding sources, Aladdin lawyers said.
The three competing bidders asked for more time. Aladdin and creditor lawyers said time had run out.
“The lenders assert the viable offer is the OpBiz deal,” said Michael Solow, who represented senior secured creditors owed more than $470 million dollars.
“The court is obliged to accept that analysis,” the judge said after four hours of hearings.
Earl and his partners traded hugs and congratulations.
Earl praised the judge and said the new hotel-casino would represent his “redemption” after financial hardships befell Planet Hollywood International.
“For me, today is the start of my rebirth,” he said.