The lenders’ bid to insert a receiver to run the Las Vegas Hilton appeared to be foundering after a daylong hearing on Tuesday.
The case will resume today after Clark County District Court Judge Elizabeth Gonzalez said she had “serious concerns” about how the gaming license would be handled in the event control changes. In particular, she wanted to see any documents that will allow the off-Strip resort’s lenders, affiliates of Goldman Sachs Group Inc. and Gramercy Capital Corp., to use the corporate license held by the majority owner, an affiliate of Colony Capital Corp.
Under the lenders’ proposal, Ronald P. Johnson of Premier Gaming Consultants, a gaming industry veteran who did a 15-year management stint at the Riviera, would obtain a personal license from the Nevada Gaming Control Board. He would then operate the hotel long considered part of the existing corporate license as belonging to Colony — even though it is not part of the collateral the lenders took in return for the $252 million in mortgages on the property.
Johnson testified that the board has not put up hurdles to licensing him but has been reluctant to acknowledge him as a receiver ahead of a court ruling.
Thomas Barrack, chairman and CEO of Santa Monica, Calif.-based Colony, told the court that he already regarded the $190 million invested in the hotel, which will carry the LVH-Las Vegas Hotel name in January, to be wiped out by deteriorating business conditions. In the 2½ years through June 30, the Hilton has posted a cumulative net loss of $75.2 million and formally defaulted on the debt in July.
Likewise, he said that under different conditions he would agree to a receiver to run the hotel to try to maximize its value to lenders. But allowing the receiver to be grafted into the corporate license while stripping Colony of all operating authority would expose it to a litany of potential financial liabilities, such as those that would result from employee layoffs or severing supplier contracts.
“There is no precedent for this kind of proposal,” Barrack testified.
Answering a question posed by Gonzelez, he termed it impractical to try to segregate the casino from the rest of the hotel.
“Everything else is really subsidiary to the casino operation,” he said.
Even if Colony, which owns 59 percent of the hotel, fends off a receiver, the relief may only be temporary. The LVH-Las Vegas, which lost its Hilton franchise earlier this year, is scheduled to go to a foreclosure sale on Jan. 12.
Contact reporter Tim O’Reiley at email@example.com or 702-387-5290.