|By Steve Green, Las Vegas
SunMcClatchy-Tribune Regional News
Feb. 17, 2012--The main creditor of the Hooters hotel-casino in Las Vegas won the right Friday to take over the property and -- importantly -- its cash.
The creditor, Canpartners Realty Holding Company IV, will buy Hooters Las Vegas with a $60 million credit bid under a sales plan approved by U.S. Bankruptcy Judge Bruce Markell during a hearing Friday.
Hooters had been marketed to other potential buyers, but no other party submitted a qualified bid for the property. That means an auction scheduled for Friday was canceled as would-be bidders decided the hotel-casino wasn't worth more than the $60 million offer on the table.
Just as importantly for Canpartners, Markell on Friday sided with Canpartners and against Hooters' investors in a dispute over whether Canpartners, as a creditor, could also seize Hooters' cash in the bankruptcy case.
Hooters investors argued that as a distressed debt investor, Canpartners couldn't assert a "deficiency judgment" for more than what it paid for the Hooters' debt under Nevada's new law limiting deficiency judgments in foreclosures.
A deficiency judgment results when a property is foreclosed on for less than what is owed against the property.
The investors complained that allowing Canpartners to seize the property's cash on top of the real estate would result in an unfair windfall for Canpartners becasue, according to the investors, Canpartners is obtaining a $60 million hotel-casino with debt it acquired for just $43 million.
Canpartners has declined to comment on whether the $43 million figure is accurate. The face amount of the Hooters debt it holds is about $178 million -- nearly all of the property's $181 million in debt.
In the end, what Canpartners paid for the debt wasn't an issue in Markell's ruling from the bench on Friday.
Markell said the new state law limiting deficiency judgments doesn't apply to the Hooters' bankruptcy sale, which was not a foreclosure.
"A (Chapter 11) bankruptcy sale is simply not the same as a state law foreclosure," Markell said, noting that in bankruptcy court there are multiple creditors whose rights must be accommodated.
He said there's no mechanism in the Bankruptcy Code to comply with Nevada's law on deficiency judgments in foreclosures, which typically would involve a single creditor like a lender or a collection agency.
"It wasn't intended to be done in this court," Markell said.
The judge didnt' rule on whether the new Nevada law is unconstitutional, as some attorneys for debt holders claim. Markell said he didn't need to make a ruling on that issue because he had found the state law isn't applicable in the Hooters case.
At issue in his ruling was whether Canparters, on top of obtaining the Hooters real estate, could seize cash at the property that under one estimate could amount to about $10 million.
Canpartners is part of the $20 billion investment company Canyon Capital Realty Advisors of Los Angeles. It's expected to line up a licensed gaming operator to take over the near-Strip, Tropicana Avenue hotel-casino with a sales closure date planned on or about March 30.
It's unknown if Canpartners will hold on to Hooters for an extended period or will quickly sell it to another gaming company.
Unable to service its $181 million in face value in debt, the 696-room Hooters Las Vegas filed for bankruptcy reorganization and protection on Aug. 1.
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