The Las Vegas Monorail Company filed for Chapter 11 bankruptcy Wednesday, one month after representatives of the struggling rail system announced such a move could allow a future $500 million expansion to McCarran International Airport.
Monorail officials said last month that they had three options: Negotiate an agreement with bondholders without filing for bankruptcy; file for bankruptcy with the bondholders’ blessing; or file without a new agreement in place.
Curtis Myles, chief executive officer of the company, would not elaborate on a deal forged with bondholders. “We have been in discussions with bondholders. We have some agreements with some of them. Some are pretty confidential,” he said Wednesday. “They are definitely aware we are filing.” Chapter 11 bankruptcy means reorganizing the financial structure. A plan developed throughout court proceedings is ultimately approved by a judge or by a vote of the creditors.
The company’s intent is to lower its payments to bondholders. Myles said the filing will have no effect on the monorail’s services.
“As a corporate entity, filing bankruptcy is a big decision for any company to make,” he said. “It means nothing operationally. We’ll open tomorrow.” Ridership figures have never met the company’s expectations since 2004, when the elevated train began providing service between the Las Vegas Convention Center and Strip hotels.
Because the train’s popularity was overestimated, the company has not paid off the $650 million in construction and start-up costs.
In 2000, the state’s Department of Business and Industry awarded the company the tax-exempt bonds in a three-tier structure with the company promising revenue after the monorail met the start-up costs.
Monorail representatives told the state they anticipated about 20 million passengers a year who would pay a fee of $2.50 per trip.
The monorail's Web site says it has carried 27 million passengers in five years.
Last year, the train carried 6 million passengers and brought in about $27 million in fare box and advertising revenues.
In prior years, the ridership figures hovered between 7 million and 8 million.
Company officials blame the sluggish economy for the drop in numbers. Las Vegas hosts fewer conventions and attendance has decreased at the events that are held in town.
The company was forced to dip into its reserve funds in 2008 in an effort to meet more than $19 million in principal and interest due for the bonds issued by the Business and Industry division.
At that time, Fitch Ratings, a New York City-based credit rating firm, estimated the company had about $69 million in reserves on hand, down $20 million from 2006.
Contact reporter Adrienne Packer at email@example.com or 702-387-2904. �