August 5, 2011
By: Mary Ann Pekara
Strapped for cash, the owner of Hooters Casino Hotel in Las Vegas was granted court permission to use what little is left to continue operating during bankruptcy. The ruling took place Thursday as part of a Chapter 11 bankruptcy filed Aug. 1 by casino owners.
Presiding over the case, U.S. Bankruptcy Judge Bruce A. Markell gave the casino’s parent company, 155 East Tropicana LLC, temporary permission to continue operating while it attempts to reorganize.
Markell questioned the company’s use of its time and resources as it fought with its creditor, Canpartners Realty Holding Co. IV LLC, in court during such a serious financial struggle. According to Bloomberg, Markel outlined three basic options for the company during the proceedings.
“Either you give up the keys pretty quickly, or you get a consensual plan or you come up with some new value,” Markel said during the hearing.
Casino owners attributed the recent bankruptcy filing to a drop in visitors to Las Vegas after the recession. Prior to filing, East Tropicana was unable to reach a deal with Canpartners. Bankruptcy was filed in order to prevent the creditor from foreclosing the Hooters Casino.
Remaining silent during the hearing, representatives of Canpartners filed court papers regarding what it believed was soaring pay in the casino’s front office.
“Hotel and casino revenues have steadily decreased since 2007, (yet) the salaries of executive-level employees have dramatically increased during the same time frame” the documents read.
Detailing the figures, the Las Vegas Review Journal showed that revenues for the 696-room hotel dropped 34 percent over a three-year period ending in 2010. Pay for nonexecutives dropped 26 percent and 37 percent of the staff was cut in layoffs. Nonetheless, executive pay rose by 8 percent.
Canpartners’ court papers claim the casino company currently owes near $177 million on its debt.
As the case moves forward, Canpartners will have the option of pressing for foreclosure of the casino or putting it up for auction in order to be cashed out.
Casino owners, in the meantime, will have to offer a reorganization plan that keeps them in control of the property, a task that may require them to infuse some of their own capital into the plan.