Las Vegas Monorail tries again to get on track

The Las Vegas Monorail will try again to exit bankruptcy with a new Chapter 11 reorganization plan that rearranges key numbers and further slashes payments to bondholders already on track to lose more than 90 percent of their investments.

In doing so, the monorail will attempt to overcome the opposition of U.S. Bankruptcy Court Judge Bruce Markell, who rejected the previous edition in November. Even though all the creditors agreed to the terms, he ruled that they merely pushed financial problems to a later date and likely would result in another bankruptcy or complete shutdown.

The main provision of the latest plan, filed on Thursday night, calls for repaying bondholders that financed the monorail's construction with two IOUs totaling $13 million, compared to the previous proposal of $40 million spread over three IOUs. Further, the former effective interest rate of 9.5 percent interest would drop to a range 3.5 percent to 5 percent and the repayment timetable would be eased.

Another level of repayment based on the monorail's performance could come into play in 2014, but only if allowed by the results of a multistep equation.

When the monorail entered bankruptcy two years ago, it owed $658.7 million on three sets of bonds. If Markell ultimately approves the new plan, two sets would be wiped out entirely and the third would be worth less than three cents on the dollar. By contrast, an estimate commissioned by the monorail management said the 3.9-mile transit line would be worth only $8.2 million if shut down and sold the highest bidder.

When the Monorail opened in 1994, it shuttled between the MGM Grand and Bally's. The current nonprofit corporation issued $650 million in bonds six years later to buy the line, rebuild it and extend it.

As it has in the past, the monorail management did not comment on the new plan.

The plan noted, "(Monorail management) believes that projected revenues are sufficient to both its (capital improvement) need through 2028 and make all payments required on the (bonds)."

This comes as the monorail posted its worst financial results since restarting full operations at the end of 2004. Last year's revenues of $22.7 million were down 4.4 percent from a year ago and the operating profit of $3.1 million marked a 29 percent fall. As recently as 2008, the operating income ran $8.2 million.

Although the monorail has always covered its day-to-day expenses, it always fell well short of making bond payments. This default led to the bankruptcy.

Further, the total ridership of 4.9 million last year was another in a string of year-over-year declines and is now slightly less than the 2005 peak. This happened despite the fact the total visitor counts have rebounded to pre-recession levels, but also reflected the loss of passengers that followed the closing of the Sahara last spring.

Besides the treatment of bondholders, the new plan changes:

■ Replacing critical hardware. Previously, the monorail estimated that it would need $108.3 million over the next dozen years and conceded it did not have the money. Working with a consultant, the monorail has slashed the bill to $24.5 million through 2028 by overhauling station doors, train controls and ticket vending machines instead of buying new.

■ Future passenger counts. The monorail formerly counted on attracting patrons from the reopening of the Sahara and the Caesar Entertainment's Project Linq complex, but Markell found they had little credibility. These were estimates were eliminated, yet the new figures show ridership starting to rebound this year, growing from 5 million to 6 million in 2018. The average fare would climb from $2.26 to $.4.94 during the same span.

The court has scheduled a March 7 hearing to review the disclosure statement, an explanation of the plan in nonlegal language. This could put the plan on course for approval in April or May.

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