Attorneys for the bankrupt Hooters Hotel took 49 pages to outline an auction process and the legal reasons behind it. But the largest creditor might have seized control of the sale in one sentence.
At a U.S. Bankruptcy Court hearing Wednesday to approve the sale procedure, the attorney for Canyon Capital Realty Advisors said the firm would submit an opening bid of $60 million and possibly go higher.
"We think this will eliminate several low-ball bidders," Canyon Capital attorney Lance Jurich said in a brief statement.
But Matthew Sodl, managing director of the investment firm Innovation Capital, which was hired to find a buyer, termed the move "highly unusual."
"What this does is effectively start the bidding before the auction gets under way," he said.
Further, it is a question at this point whether the bid is so high it will scare off rivals. Sodl declined to comment on what he thought would happen.
But court papers filed by Hooters' owners in November put the value of the off-Strip property at $46.6 million, rising to $63.9 million when all the inventory and cash in operating accounts is included. But an adviser working with Canyon Capital earlier in the case estimated he could arrange a sale for as much as $70 million.
Canyon Capital will submit what is known as a credit bid, in which each dollar of debt is counted as a dollar toward the price. That would allow Canyon to bid $127.9 million before adding fresh cash.
The written bids are due Feb. 10, with an in-court auction scheduled one week later if enough interest emerges. The winner would then be approved as part of a Chapter 11 repayment plan on March 2.
Outside bidders must put up a $2.5 million cash deposit, but Canyon Capital is exempt.
Contact reporter Tim O'Reiley at toreiley@review journal.com or 702-387-5290.