By Keith Benman, Times of Northwest Indiana
keith.benman@nwi.com,
Majestic Star Casinos embarked on a voyage in filing a Chapter 11 bankruptcy Monday that could have many twists and turns and could even possibly end owner Don Barden's run in Gary.
The fact that Majestic Star could not come to agreement with its creditors before filing the bankruptcy means the fate of Majestic Star and its future in Gary remain up in the air, gaming experts and analysts said Tuesday.
There is no reason to take away the licenses owned by Majestic Star owner Don Barden, said Ernie Yelton, executive director of the Indiana Gaming Commission. But the bankruptcy proceeding could lead to new ownership, in which case the gaming commission would consider transferring the licenses, Yelton said.
"I would be surprised if he (Barden) had majority ownership at the end of the day," Yelton said. "But keep in mind anything is possible."
Gary leaders have backed Barden's quest to shift one of his licenses to a land-based casino in Gary, but also have been involved in a spat over development funds the casino pays the city. Bankruptcy court records show the city as Majestic Star's 10th largest creditor, with the city claiming the gaming company owes it $7.45 million.
Lenders on Monday filed a searing objection to the bankruptcy filing, accusing Majestic Star of "stonewalling" during negotiations and "unlawfully" diverting $34 million of loan cash collateral out of secure accounts.
Majestic Star Chief Operating Officer Mike Darley said the company has acted in good faith with all creditors in negotiations but in the end was not able to reach an understanding on restructuring loans.
Darley said Majestic Star's two casinos in Gary will continue to operate on a business-as-usual basis, noting that the bankruptcy judge approved motions allowing for the continued payment of the casinos' 1,300 employees and other actions Tuesday.
"The message to our customers is we have spent considerable amounts of money improving our properties over the past year," Darley said. "And that should give them the idea we not going out of business."
Majestic Star and seven affiliates seeking protection listed assets of $402.1 million and liabilities of $771.1 million as of Oct. 31 in their bankruptcy petition.
Majestic Star has been in talks with lenders for more than a year after it missed a key interest payment on a loan in October 2008.
On Oct. 30, 2009, Majestic Star received a default notice on a $79.4 million loan to speed up payment obligations, according to a Nov. 5 filing with the Securities and Exchange Commission.
Ed Feigenbaum, editor of Indiana Gaming Insight, said the fact Barden couldn't pull lenders on board before filing bankruptcy will complicate the situation. If Barden had been able to do so, he might have been able to file a prepackaged bankruptcy, which usually assures a quick and orderly exit.
He expects Barden will have an interest in whatever company runs the casinos after the bankruptcy proceedings are complete.
He said big improvements at other Northwest Indiana casinos have definitely left Majestic Star's Gary boats hurting.
"It's a function of what happened with his properties around the country, and it's obviously a function of not being able to spend significantly on capital projects, especially versus Horseshoe and Blue Chip."
Horseshoe Casino in Hammond opened its new $500 million gaming barge in August 2008, with 350,000 square feet of space including a 3,200-seat theater that draws top entertainment talent.
In January, Blue Chip cut the ribbon on a new $130 million 22-story, 300-room hotel tower adjacent to its gaming boat in Michigan City.
Gov. Mitch Daniels said Majestic Star may have to give up its ownership of the two gaming boats in Gary, but that the casinos will stay open and workers will stay employed.
"If they can't make it, someone else will buy the asset," Daniels said. "These assets do make money. Someone else will buy it, they'll keep the employees and go on more profitably."
Times Statehouse Bureau Chief Dan Carden contributed to this report.