Saturday, December 21, 2002
Copyright © Las Vegas Review-Journal

Partnership emerges in Aladdin sale

Planet Hollywood and Starwood Hotels & Resorts Worldwide are emerging as the front-runners to buy the bankrupt Aladdin hotel-casino, an inside source said Friday.

A partnership led by the two American companies and including unnamed other partners is offering between $400 million and $500 million for the Strip resort, which would pay off most or all of the property's secured creditors, the source said.

"The Planet Hollywood bid has jumped to the front," the source said, predicting the offer would be accepted by Aladdin's bankers and then named the stalking horse bid by U.S. Bankruptcy Court Judge Clive Jones.

Other offers would have to top the bid in a still-to-be-determined auction process, or the stalking horse bidder's offer would be accepted.

The Regent Las Vegas emerged from a similar sales process in late 2001 after being purchased by its stalking horse bidder and renamed the JW Marriott.

The partners are planning to rename the resort the Planet Hollywood by Sheraton, with Starwood supplying its Sheraton brand name and its powerful telephone and Internet room reservation system, the source said.

Planet Hollywood would lend its own brand name, star power and movie memorabilia collection to the deal.

A Wall Street source said a Starwood-Planet Hollywood affiliated and branded property probably could succeed despite the property's checkered record.

"Starwood has a huge customer database and a good points program, Starwood Preferred Guest," the source said. "A lot of people want to go to Las Vegas and use their frequent traveler points to do so. Starwood could use the rooms in Las Vegas, both for regular customers and to reward Preferred Guest members.

"For a Planet Hollywood-themed property to succeed, if it's done right, they'd use the theme to create events on an ongoing basis, perhaps even movie premieres, to give people a reason to visit again and again," the Wall Street source said.

Most of the cash in the deal would be loaned by the current bankers, who have an incentive to replace nonperforming Aladdin loans with new debt. Unnamed investors or the bankers would provide an estimated $80 million to $160 million to fix design flaws at the property.

The Aladdin owes secured creditors $540.3 million, including about $70 million for slot loans and leased equipment. The megaresort also owes $85.2 million to unsecured creditors and $2.6 million in priority tax claims.

By ending Aladdin's bankruptcy protection, the bankers could remove the sizable mortgage, about $430 million, from their portfolio of nonperforming loans.

Orlando, Fla.-based Planet Hollywood earlier this week emerged from Chapter 11 bankruptcy protection, its second successful bankruptcy emergence since 2000.

The company owns Planet Hollywood in the Forum Shops at Caesars.

In 1997, Planet Hollywood's deal to license its name to a company that wanted to buy the Desert Inn from then-owner ITT collapsed, scotching the company's plans for a stand-alone $850 million Strip resort.

Another deal made with Aladdin developers to open a $250 million music-themed boutique resort, Sound Republic, on the site fell through in 1998.

Planet Hollywood co-founder and CEO Robert Earl was unavailable to comment on reports of his company's interest in the Aladdin.

Earl recently acknowledged his company's long-standing interest in the Strip.

Starwood Hotels & Resorts Worldwide is the former owner of Caesars Palace and the Desert Inn on the Strip. The White Plains, N.Y.-based Starwood owns a number of major hotel brand names, including Sheraton, Westin, St. Regis, W and Four Points.

Starwood executives did not return phone messages.