By Jon Seidel, Post-Tribune
jseidel@post-trib.com
Don Barden said he's planning no layoffs at his two Majestic Star Casinos in Gary following his company's filing Monday for Chapter 11 bankruptcy protection.
Majestic Star Casino LLC claims in a petition filed in U.S. Bankruptcy Court in Delaware to owe Gary $7.45 million, naming the city as its 10th largest creditor. The filing also arrives while state lawmakers are considering a move to land-based casino gambling in Indiana.
"It just shows how competition is," Barden said in telephone interview from Delaware. "This is a very tough economy and others will follow unless there's relief."
Majestic Star has been trying to restructure for about a year, Barden said. Negotiations among bond holders "fell apart" recently, he said, forcing the company's hand.
The Las Vegas-based casino owner recently disclosed in a Security and Exchange Commission filing that it was declared in default of more than $79 million in debt by its lenders after missing multiple interest payments since October 2008. It also operates casinos in Black Hawk, Colo., and Tunica, Miss.
"We'll be able to operate exclusively without any interference from bond holders," Barden said Monday.
A corporate press release emphasized the restructuring of the company's debt won't affect day-to-day operations at its casinos or hotels, nor will it affect ongoing relationships with suppliers.
The company made motions Monday to continue employee wages and benefits, as well as customer programs.
"It will be seamless," Barden said. "It's really on the corporate level."
Gary now a creditor
Majestic Star's largest creditor is Lehman Brothers, Inc. reorganization, which is owed $46 million, according to the filing. The company also notes that its debt to Gary is in dispute.
Gary and Majestic Star, the owner of both local casino licenses, have been in negotiations for years now over its local development agreement. Former Mayor Scott King signed an amendment to that agreement in 2005 which required Majestic Star to pay the city 6 percent of its adjusted gross revenue.
Previous agreements set that amount at 7 percent. It also capped the maximum amount of money Majestic Star would pay to Gary at $6 million annually.
However, attorneys for Mayor Rudy Clay have disputed the validity of that agreement because it wasn't approved by Gary's Board of Public Works and Safety. In February 2008, Majestic Star filed a lawsuit against the city, asking a judge to sort out the matter.
In the meantime, instead of making payments to the already cash-strapped city, Barden said he would place money owed to Gary in an escrow account.
"The city is disappointed that Majestic Star has found it necessary to file for bankruptcy," Corporation Counsel Susan Severtson said.
"We will be making sure that we are represented fully in a bankruptcy court in Delaware to represent the city's interests."
City Council member Roy Pratt, D-at large and chairman of the city's casino committee, has warned for several months that Majestic Star could end up in bankruptcy.
He said Monday he is disappointed in how Gary's attorneys have handled the lawsuit, and he's disappointed that the Indiana Gaming Commission has allowed Barden to keep the two licenses in Gary.
"The court needs to order him, or we need to file suit to order him, to pay the money that he has in the escrow account," Pratt said.
"You shouldn't be able to take money away from the city that he was supposed to give the city."
Pratt also called Barden's $7.45 million figure "completely erroneous." Mayor Rudy Clay, however, said he's not about to turn it down.
"We would definitely take the $7 million," Clay said.
The mayor also pointed out that, since filing the lawsuit against the city, Barden has released $4 million out of the escrow account.
"We'll have to look all that over in the next few days," Clay said.
Urgency in Indianapolis?
Clay and state Rep. Charlie Brown and Sen. Earline Rogers, both D-Gary, all said Barden called them Sunday to warn of the pending bankruptcy filing.
"He said he was going to do everything to protect Gary," Rogers said.
State legislators are expected to soon take up the idea of allowing land-based casinos in Indiana. The last push that would have moved one of Majestic Star's licenses to Interstate 80/94 failed during a special budget session in June.
Instead of throwing a wrench in the idea, Rogers said Barden's bankruptcy filing should create a sense of urgency in Indianapolis.
"There's no doubt about it that, you know, Gary is a city that's before the Distressed Unit Appeals Board and, absolutely, we need to get as much money in this city as we can," Rogers said.
Even if the measure had passed during the 2009 session, Brown said, Barden still would have needed to take on a "major partner" to accomplish the move.
"Nothing has changed in that respect," Brown said.
Clay, meanwhile, called it a "top priority" to put a land-based casino at I-80/94.
"The whole entire state, we're in the Rip Van Winkle age with these riverboats," Clay said. "That's all I'm saying."
Staff writer Christin Nance Lazerus contributed to this report.