Tuesday, October 22, 2002
Copyright © Las Vegas Review-Journal

Aladdin losses still mounting

Property officials remain positive

The bankrupt Aladdin recorded its fifth straight money-losing month in September, the company reported in a Monday U.S. Bankruptcy Court filing, but property executives say the Aladdin results are better than they superficially appear.

The 2,567-room property lost $2.5 million in September after losing $117,768 in August, $2.5 million in July, $3.5 million in June and $423,369 in May.

Cash flow, reflecting earnings before interest, taxes, depreciation and amortization, was $2.7 million, compared with $4.1 million in August, $2.4 million in July and $2.1 million in June.

The Aladdin had negative cash flow of $1.9 million in September 2001, a month affected by the tourism slowdown that followed the Sept. 11 terrorist attacks.

The property has generated $32.9 million in cash flow during its most recent 12-month period, a fraction of the cash flow produced by other similarly priced Strip megaresorts that, like Aladdin, opened between 1998 and 2000, including Bellagio, Mandalay Bay, The Venetian and Paris Las Vegas.

The $1.6 billion Bellagio reported cash flow of $177 million for the first six months of this year.

"The all-new Aladdin operates under constraints not faced by its competitors," Aladdin spokesman Fred Lewis said, citing a number of revenue sources routinely tapped by competing properties that Aladdin managers don't have.

"We pay $3.2 million per month to (Desert Passage owner) TrizecHahn for use of the parking garage, and we don't collect any revenue from telephone service and gift shops," Lewis said. "If you take those factors into account, our performance looks a lot better, and a lot more like our competitors."

Aladdin Chief Financial Officer Tom Lettero's most recent monthly status summary filed with the bankruptcy court reported $19 million in September revenue, compared with $20.6 million in August, $18 million in July and $16.3 million in June.

The U.S. Bankruptcy Court is waiting for Aladdin lawyers to submit a sales procedure for the $1.05 billion megaresort.

Speculation on a possible Aladdin bidder centers on Pinnacle Entertainment and Colony Capital LLC, two Southern California-based casino operators.

The two companies would combine on a "stalking horse" bid for the property, industry sources have said. The companies are expected to offer about $500 million for the property along with a commitment to invest about $100 million more to renovate the property. The sale probably wouldn't take place until next summer, at the earliest.