The parent of Majestic Star casinos and hotel in Gary is taking its first crack at showing its Chapter 11 bankruptcy reorganization plan.
Majestic Star Casino LLC and affiliated companies filed a reorganization plan and financial disclosure statement Friday in a federal bankruptcy court in Delaware.
While the plan will create a framework for what creditors ultimately will receive in the deal, the company admitted that discussions are ongoing to create the best resolution for all parties involved. Majestic Star listed $540.5 million in assets and $941.7 million in liabilities as of July, which includes more than $630 million of outstanding debt.
"The plan will maximize value for all of the debtors' stakeholders, significantly deliver the debtors' capital structure and thus enable the debtors to emerge from these Chapter 11 cases better equipped to compete in the highly challenging casino gaming marketplace," according to a motion filed on behalf of Majestic Star on Sept. 14.
Michael Hile, an attorney with Indianapolis-based law firm Katz & Korin PC, said Majestic Star's preliminary plan is short on details and doesn't identify how the reorganized company will assume certain contracts such as those with the city of Gary.
Hile, whose firm the city of Gary hired earlier this year to represent its interests in the bankruptcy case, said the firm currently is negotiating with Majestic Star on a $7 million debt the city believes it is owed under a 1996 local development agreement.
A call placed to Majestic Star's executive offices in Las Vegas on Monday went unreturned.
In broad terms, Hile said the plan calls for senior secured creditors to be issued new debt and retain 65 percent equity ownership in the new company. Remaining ownership interests will be divided among holders of senior notes and other claimants. Certain claimants also could receive a "small" cash payment, Hile said.
The plan calls for Majestic Star to emerge from bankruptcy protection by Sept. 30, 2011, and to have current gaming licenses transferred to the reorganized company. Last week, the Indiana Gaming Commission renewed gaming licenses for the company's two vessels in Gary.
Also in the plan, Majestic Star Casino CEO Don Barden's ownership interest in the company would be terminated, Hile said. The Las Vegas-based company would keep its chief operating officer, chief financial officer, general counsel and managers of each gaming and hotel property in place. Hile said a new board of directors would be chosen in the coming months.
Ed Feigenbaum, publisher of the Indianapolis-based Indiana Gaming Insight newsletter, said the company may go that route because creditors may not have the expertise to operate the venues better than current management. He pointed to the financial improvements that the two Gary gaming vessels have shown despite the effects of the Cline Avenue closure.
"The other thing is that (general manager) Larry Buck in particular has done yeoman's work at that property in getting it back on track," Feigenbaum said. "If you look at the results in the last year, they are starting to turn things around."
Majestic Star Casino filed a voluntary petition for Chapter 11 bankruptcy protection Nov. 23 and its entities have continued to operate since that time. Company properties include two casinos and a hotel in Gary, a casino and hotel in Tunica, Miss., and a casino in Black Hawk, Colo.
Creditors and a bankruptcy court judge ultimately must approve a reorganization plan. Creditors with voting power must cast a ballot approving or rejecting the plan by Dec. 6.
A hearing on the plan is planned for Dec. 16, but the next scheduled proceeding is Sept. 28.
U.S. Bankruptcy Court Judge Kevin Gross approved a motion to extend Majestic Star Casino's exclusive right to file its reorganization plan and amendments to it through Jan. 15 and solicit votes on the plan through March 15.
A clean corporate slate will give an opportunity for the Indiana casinos to continue business as usual and may provide an opportunity for an investor sitting on the sideline to buy into a company with a stronger balance sheet, Feigenbaum said. In the new company, owners also will be more apt to invest money into the properties or "make a bigger case to the (Indiana General) Assembly for moving one of the licenses to a land-based opportunity."