|By Steve Green, Las Vegas
SunMcClatchy-Tribune Regional News
Aug. 01, 2011--The owner of the Las Vegas Hooters resort on Tropicana Avenue filed for Chapter 11 bankruptcy reorganization on Monday to block a threatened foreclosure -- the latest in a series of financial debacles to hit the local casino industry since the onset of the recession.
The company, 155 East Tropicana LLC, in its initial filing in U.S. Bankruptcy Court listed assets of $10 million to $50 million against more than $162 million in liabilities.
A sister company, 155 East Tropicana Finance Corp., also filed for Chapter 11 reorganization.
Under Chapter 11, companies continue to operate while they propose a plan of reorganization that creditors at some point will vote on.
Mike Hessling, president of the property, said the bankruptcy was filed after efforts to negotiate another solution with the company's main bondholder, which bought the debt at a discount, were not successful.
"So we're going to negotiate this way," he said of the bankruptcy filing.
Hessling declined to name the bondholder, but records show Canpartners Realty Holding Co. IV filed a claim against the property in December and has been threatening to foreclose since February, with the latest foreclosure date set for Aug. 8.
The bankruptcy filing will likely halt the foreclosure on that date, although Canpartners can ask the Bankruptcy Court later for permission to foreclose.
Records indicate the property is encumbered by mortgage and bond debt totaling $162 million plus hundreds of thousands of dollars in trade claims. The initial filing didn't fully disclose exactly how much is owed or exactly how much 155 East Tropicana feels the property is worth.
The Hooters bankruptcy aimed at blocking a foreclosure is in contrast to another recent Las Vegas gaming bankruptcy -- Riviera Holdings Corp. -- that was far friendlier.
In that case, much of the company's debt was purchased by an investor (Barry Sternlicht), who went on to assume control of the company through a prearranged plan.
Hessling said it will be business as usual at the Hooters property -- which has 696 rooms and about 650 employees -- while the bankruptcy case is resolved. The company's license to use the Hooters name won't be affected by the filing, he said.
"The company is throwing off a lot of cash. The place has been busy," he said.
The case is likely to last for months or even years, depending on whether debt holders and other creditors sign off on reorganization plans. It may take until the end of the year before a plan is voted on, Hessling said.
Hooters has been in default on its debt since April 2009 as the recession harmed its ability to service its debt.
Hooters, which stopped filing public finance reports after the first quarter of 2010, had repeatedly warned before then that a bankruptcy was possible.
155 East Tropicana is owned by Hessling and other investors who acquired the property just east of the Strip in 2004 -- during the economic boom -- when it was called the San Remo.
Big unsecured creditors listed in Hooters' initial filing including Sysco Food Services, $139,000; NV Energy $129,000; International Game Technology, $126,000; and Hooters of America, $69,000.
The filing was preceded by several gaming bankruptcies in and affecting Las Vegas including: Tropicana Entertainment LLC, Herbst Gaming, Station Casinos, Black Gaming, Riviera Holdings and Fontainebleau Las Vegas.
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Here's the text of today's bankruptcy announcement from 155 East Tropicana:
155 East Tropicana LLC, owner of the Hooters Casino Hotel (the "Company") announced today that it will seek a financial restructuring of its current debt through a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code which was filed today with the United States Bankruptcy Court for the District of Nevada.
The Company had been in extensive negotiations with its primary bondholder, which purchased approximately 98% of the company's debt at a substantial discount. The Company no longer believes a pre-negotiated restructuring is possible, and has therefore elected to commence the Chapter 11 process immediately. All hotel and casino operations will continue to operate as usual during the Chapter 11 process, including with respect to employees, customers and vendors.
The Company stated: "We regret that we have been unable to reach an acceptable settlement with our new bondholder. We are confident that an orderly and transparent Chapter 11 process will provide the Company with the opportunity to properly restructure its balance sheet and emerge as a stronger business, while also continuing to operate with no disruption to our customers, employees and vendors. Absent the significant debt payments we're currently obligated to pay, Hooters Casino Hotel is a profitable, successful business and we look forward to completing this process to return our entire focus to running our business and serving our guests."
The Company also stated: "This action in no way affects the operation of the more than 430 Hooters Restaurants in 44 states and 27 countries which are owned or franchised by Atlanta-based Hooters of America, LLC."
The filing is planned in order to protect the Hotel Casino's assets and ongoing hotel services to its guests. Chapter 11 of the U.S. Bankruptcy Code allows a company to continue operating its business and managing its assets in the ordinary course of business. The U.S. Congress enacted Chapter 11 to encourage and enable a debtor business to continue to operate as a going concern, to preserve jobs and to maximize the recovery for all stakeholders.
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