Largest bondholder defends Hollywood Casino´s original reorganization plan
A sale of Hollywood Casino to Eldorado Resorts would be a sale to an established gaming company that is succeeding in a market similar to Shreveport, whereas a deal with Black Diamond Capital Management would bring "insurmountable" licensing risk, a representative from Hollywood's largest creditor testified Monday.
Tom Reeg, managing director in the high-yield group at AIG Global Investment Group, was on the stand in federal bankruptcy court most of the day touring the sale to Eldorado, Hollywood's original plan. Reeg was grilled by lawyers who want to introduce a sale to Black Diamond, Hollywood's second-largest creditor.
Black Diamond is asking federal Judge Stephen V. Callaway to lift the casino's exclusivity period, the six months in which only the casino can submit a reorganization plan. Once that period ends, Black Diamond plans to enter its purchase plan into the court, allowing creditors to vote between two plans instead of one.
Other non-bondholding creditors and the City of Shreveport are among those that support increased competition, which they say will bring a better deal. Hollywood and a committee of bondholders, including AIG and four other companies, want to extend the exclusivity period so that creditors will vote either for or against just the Eldorado sale.
In testimony Monday, Reeg detailed why he thought Eldorado was a better company to lead Hollywood out of its financial troubles.
The 32-year-old company operates a casino in Reno, Nev., a market similar to Shreveport because most of its customers live a few hours away. It operates an 800-room hotel, which like Hollywood's is small for the market, Reeg said.
"They have to be extremely cognizant who's in each room each day and how valuable they are," he said.
In a hearing April 4, Black Diamond had touted leadership by management company KOAR, run by Paul Alanis, former general manager of Horseshoe Casino in Bossier City and a former CEO of Pinnacle Entertainment Inc., which owns Bossier City's Boomtown Casino. Black Diamond's argument was that Alanis had experience in the Shreveport market and could easily be re-licensed.
But Reeg said Black Diamond, an investment firm, would need at least three more months to be licensed by the Louisiana Gaming Control Board because the board is used to investigating gaming companies. That may cause construction to bump into the casino's busiest periods -- the end and the beginning of the year, Reeg said.
Reeg discounted a licensing argument that could be made for AIG, whose parent company is being investigated for accounting practices. The Eldorado deal is set to have an amendment that would require companies that are licensing risks to sell their equity interests.
Reeg said Eldorado has similar plans to improve Hollywood as the judge heard last week when Alanis testified about Black Diamond's plans. Eldorado would brand the casino as "Eldorado," and Black Diamond would brand it as "Silver Slipper," but both plans would include new slot machines, ticket slot technology and table games on the same floor.
Unlike Black Diamond, Eldorado wouldn't lease out the steakhouse and diner spots to outsiders, he said.
"Eldorado as a company has been typically proud of its own food product," Reeg said. "A couple of restaurants have won what I'm told are prestigious awards."
Also Monday, Reeg defended several features of the Eldorado plan as better than Black Diamond's, including incentive management fees, which he said would help the company grow; and a plan to wait until the third year to pay bondholders, which he said will make the company stronger and the bonds more valuable.
He also said that two out of five members of the official bondholders committee don't absolutely support that decision. But he said he believed that the companies representing two-thirds of the casino's debt would be in support of the Eldorado plan, not Black Diamond's.
