Hooters Casino Disputes Creditor Claims
The Hooters casino resort, which is based in Las Vegas, has disputed charges which have been voiced by their main creditor. The charge claims that foreclosure of the bankrupt casino will go ahead. Canpartners Reality Holding Co. IV, Hooters’ creditor, were put forward in a bad light at the court filing on Friday. The casino described them as an investor out to profit from their misfortunes.
In attempt to prevent a foreclosure which was threatened by Canpartners, Hooters filed for Chapter 11 bankruptcy reorganization and protection on August 1st. Canpartners, which is part of Canyon Capital Reality Advisors, explained that Hooters had simply failed to succeed in Las Vegas. They see the casino’s attempt to reorganize is unrealistic and explained that they will not find the capital they need to get a bail out.
Canpartners are unwilling for Hooter’s to use the collateral they have provided the casino to try and find a new source of funding or somebody who is willing to buy the company. The creditor argues that they are in too much debt now for this to be successful. The debt is currently over $180 million, whereas the property itself is only worth around $70 million.
Not foregone conclusion
Hooters disagrees with this analysis. They argue that it cannot simply be regarded as a foregone conclusion that they will not be able to reorganize. They are using Gordon Silver, the Las Vegas law firm, to file their bankruptcy.
“Canpartners is stating that it will never agree to any proposal, and therefore, the court should end this proceeding. If one takes this to its logical conclusion, in every Chapter 11 case a secured creditor has a veto over the Chapter 11 case,” stated Hooters’ filing. “Canpartners knows that this is not the way it works; that it is not a Roman emperor who can decide life and death for others simply by a thumb’s up or down.”
Hooters claim that Canpartners’ accusations over the fact that their executives increased their salaries are false. The casino explained that the CEO Neil Kiefer and the President Mike Hessling have not had any salary increase at any point in their five years with Hooters. The raises in salary for Deborah Pierce, Chief Financial Officer, and Gary Gregg, Chief Operating Officer, were to keep in line with market figures.
Hooters’ filing explained, “In electing to remain with the company, both Mr. Gregg and Ms. Pierce forfeited employment offers at substantially higher salaries.”
The fact that business has improved works in Hooters’ favor. They had EBITDA, which is their earnings before interest, taxes, amortization, and depreciation, of $4.68 million in the seven months which ended on July 31st. This is an increase of $1.5 million in comparison to the figure in the same period during 2010.
Hooters’ filing stated, “Consistent with the basic principles of the Bankruptcy Code, debtors are entitled to ascertain whether the marketplace reveals any prospective investors.”
The hearing has been planned for November by Bruce Markell, a Bankruptcy Judge. It will then be decided whether Hooters will be able to use the collateral provided by Canpartners to reorganize.