Brookfield Asset Management Inc. and Warner Gaming LLC were granted ownership and operational control of the Hard Rock Hotel on Thursday after state gaming regulators approved their takeover plans.
The Nevada Gaming Commission approved the deal, with Commissioner Joseph W. Brown abstaining. Earlier Thursday, the state Gaming Control Board unanimously approved the transaction after a 90-minute hearing.
Gaming Control Board Chairman Mark Lipparelli admitted the companies involved were asking for "extraordinary relief" and this was not the usual way to do it. But, moving forward, he said, it was better than the alternative -- the foreclosure and bankruptcy of a Las Vegas hotel-casino.
Before approving the transaction, the control board placed several conditions on the sale. One condition was a Monday deadline to turn over escrow and loan documents to the Gaming Control Board to assure the surrender of the license by Morgans Hotel Group Co. and the issuance of a new license to Warner Gaming.
"This transaction came together quite quickly ... because of the defaults at the Hard Rock," Michael Alonso, a gaming attorney with Jones Vargas in Reno, told the state Gaming Control Board.
Alonso, who represented Warner Gaming at the special hearings in Carson City, said it was the intention of all parties involved to restructure the debt, keep the property open, keep people employed and continue providing the state with tax revenues.
The Hard Rock Hotel had been struggling to meet its obligations on $1.25 billion in debt. After the deal closes Tuesday, the Hard Rock will have a restructured debt obligation of $898 million.
Under the agreement, ownership of the property will transfer LVHR Casino Inc., a subsidiary of Brookfield, while management of the property will be transferred to Warner Gaming.
Andrea Sue Balkan, a manager with Brookfield, said the $178 million loan due them would be turned into an equity stake. Once ownership and the property's gaming license are transferred, DLJ Management and Morgans Hotel Group will no longer have a financial interest in the property, she said.
Balkan told regulators Brookfield planned to set aside $30 million to reposition the property. Board members and commissioners were told no layoffs were planned and customers should see little change at the property.
She said the company would "pay all the vendors as quickly as possible" once the sale closes.
"We want to grow the business," Balkan told regulators.
Gaming Commission Chairman Peter Bernhard expressed some concern over whether Warner Gaming has enough experience to manage the Hard Rock Hotel.
Warner Gaming founder William Warner assured the commission that his 14 years with Station Casinos Inc. prepared him for managing a property the size of the Hard Rock Hotel.
Warner said he would not only monitor security programs, but would also be on the property at night and on the weekend. He also said he would consider hiring an independent shopping service to monitor his employees' behavior.
Commissioner Dr. Tony Alamo wished Warner well, but referring to the legal issues the property recently dealt with, cautioned him and Brookfield that the "worst thing that can happen to you is to come before us with some issues."
Contact reporter Chris Sieroty at firstname.lastname@example.org or 702-477-3893.