A last-minute loan Tuesday allowed locals casino Jerry’s Nugget to win approval for its Chapter 11 reorganization plan and continue the long-time ownership of the Stamis family.
The fresh financing, coming from the Toronto-based commercial real estate lender Romspen Investment Corp., will provide $7.5 million to pay off most creditors in full.
The loan documents were filed with the U.S. Bankruptcy Court just 77 minutes before a scheduled 9:30 a.m. hearing, and negotiations among those involved in the case continued into the early afternoon.
The deal averted a potentially expensive court fight between Jerry’s Nugget and its largest creditor, U.S. Bank.
“This year is our 50th, and we look forward to being part of the valley for the next 50 years,” said company President Jeremy Stamis.
He and his brother Joseph, the secretary and treasurer, are the family’s third generation in charge since Jerry’s Nugget opened in 1964. One provision of the plan calls for a trust controlled by their uncle, George Stamis, to pass to them a 95 percent ownership stake plus the gaming license.
As a condition to court approval, the casino agreed to a Jan. 31 deadline to close the loan and execute the plan. Otherwise, it will accede to a U.S. Bank request to appoint a trustee, something the bank tried unsuccessfully earlier in the case, to sell off the casino to pay off the debt.
Jerry’s Nugget attorney Talitha Gray Kozlowski said she expected all the details to be concluded within a month.
Part of the casino’s problem stemmed from a slide in the locals gaming market that started about five years ago. According to court records, the total revenues ran $22.5 million in 2011, a 3.5 percent drop from the previous year, while pre-tax operations ran around the break-even level. This was not enough to support repayment of the U.S. Bank loan that came due in 2011.
Jerry’s Nugget took out what was originally a $3.7 million loan from U.S. Bank in 2005 to pay for renovations. The casino covers 87,000 square feet, with 630 slots, nine table games and a 150-seat bingo hall that was refurbished last year.
With the help of a restructuring consultant and an improving economy, the total revenues of $12.9 million during the first half of this year ran 8.9 percent ahead of the same period last year. The earnings before interest, taxes, depreciation and amortization of $1.6 million marked a 62 percent improvement.
In addition, the casino’s fortunes became entangled in a proposed mobile home park in Mesquite in which Jeremy and Joseph Stamis had invested. The $40.3 million loan for the project, which was never built, was guaranteed by Jerry’s Nugget and led to a $33 million claim that blocked efforts to refinance the U.S. Bank loan when it came due.
After efforts to work out a settlement faltered, the casino resorted to bankruptcy protection in August 2012.
Even though the casino will return to normal operations should the reorganization plan go head as planned, the litigation could continue for some time.
U.S. Bank said in court papers that it was owed $5 million as of Sept. 2, with the interest clock continuing to tick. However, Jerry’s Nugget disputes the validity of some of the interest plus the attorneys fees that kicked in after the default, so some of the money ticketed for the bank will go into a $1.75 million reserve until the final amount is settled.
Kozlowski said unsecured creditors will receive from half to full repayment depending on contingencies still not settled. Court papers in June put this category at $6 million, but that could change.