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B.B. King’s at Mirage may be facing last call

Although the B.B. King's Blues Club in The Mirage opened in November 2009 with characteristic Las Vegas fanfare and an appearance by the famous guitarist, its finances and operations have struggled from the beginning.

Attorneys for the restaurant and music venue, which has been in Chapter 11 bankruptcy since early 2011, claimed in a U.S. Bankruptcy Court hearing Tuesday that it could face last call in mid-November if the MGM Resorts International property continues to keep what the club contends as too much of the tabs that customers charge to their rooms. But The Mirage portrayed B.B. King's as having violated its five-year lease from opening day and using the room charge issue to place all the financial risk with the resort.

U.S. Bankruptcy Judge Mike Nakagawa promised a ruling by today.

Whichever way the decision goes, B.B. King's has become a case study of how the widespread practice of Strip resorts leasing some operations such as restaurants and shops can run into a thicket of problems.

Almost from the first day, club management has argued with The Mirage management over how much is paid in stewarding fees for using a central dishwashing and utility facility. Under the arrangement, B.B. King's has agreed to reimburse The Mirage for a monthly amount that has averaged more than $20,000 a month, but has gone so far as to install a video camera in the area to document what it contends is systematic overcharging.

The end game with this and other points of contention is for The Mirage to rid itself of the only restaurant owned by outsiders, according to Sean Claggett, attorney for B.B. King's. "The Mirage is essentially running roughshod over (B.B. King's)," Claggett said.

The Mirage counters that B.B. King's chose the stewarding arrangement on its own and has been billed fair amounts.

At the same time, The Mirage's chief financial officer, Deborah Hottensen, said in court papers that the club defaulted on its lease for the 11,155-square-foot space from the beginning, running up $635,000 in unpaid obligations when bankruptcy began in February 2011.

Moreover, deductions from the room charges are the only way that The Mirage has received any payments for rent and stewarding after the case was filed, according to Hottensen.

In June, The Mirage started to withhold money to start paying down the pre-bankruptcy debt. Before that, Hottensen said The Mirage had turned over to B.B. King's $760,000 in room charges not needed to cover that month's rent.

But Claggett argued that paying off pre-bankruptcy bills violated Chapter 11 rules. In addition, he said that The Mirage had pocketed nearly $37,000 in tips tagged for employees during the five weeks ended July 2.

Without a court order to collect more of the room charges, Claggett said the club "would likely be out of business" unless the Memphis, Tenn.-based parent company bails it out.

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.

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