Business dispute leads casino owner to court|[03/13/08]

Published 12:00 am Thursday, March 13, 2008

A disagreement over its financing package has led Legends Gaming, owner of DiamondJack’s casinos in Vicksburg and Bossier City into bankruptcy court where a federal judge will decide the interest rate lenders will be paid.

Michael Kelly, president and CEO, said casino operations continued normally through Wednesday’s Chapter 11 filing.

“This has nothing to do with finances,” Kelly said. “We have no financial problems. This is simply a business dispute between us and our lenders, and unfortunately we’ve had to file under Chapter 11 in order to have a federal judge rule on it.”

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The dispute is between Legends Gaming and about 20 Wall Street lending institutions over interest rates on $215 million the company’s owners borrowed in 2006 to buy the casinos, both formerly Isle of Capri properties. No local banks or lending institutions are involved in the case.

The $215 million loan Legends Gaming received in July 2006 came in the form of multiple hedge funds. The gaming company provided its lenders a five-year performance projection in order to negotiate the interest rate on the loan. Kelly said the company fell “just short” of its projected profits last fiscal year, and now the lenders are trying to raise interest rates on the remaining loan by about 2 1/2 times what the company currently pays. Kelly would not disclose the actual interest rates.

“We have been having discussions with our lenders since January to try to resolve this outside of court, but we haven’t been able to come to an agreement,” he said. “Well, they call it a discussion; I call it highway robbery. It’s come down to us filing bankruptcy rather than having the bank call in the loan.”

Kelly said the case will have no bearing on the casino’s current or future operations. The Vicksburg property is one of four in the city and was the first to open when the Isle of Capri docked a gaming boat and barge here in August 1993. Since then there has been construction of permanent facilities, including a hotel. After the purchase, DiamondJacks announced a complete remodeling and began with repainting the exterior. Complete remodeling of the lobby area, which houses entrances to two restaurants on the property, has begun.

“I’ve personally informed our team members of what is going on, and it’s business as usual,” Kelly said. “No one is losing their jobs. We’re still hiring for open positions. Team members who are due for evaluations and raises are still getting them. Nothing has changed for our customers either. We’re still honoring all coupons and rewards club incentives.”

As for as the possibility of Legends Gaming being forced into financial bankruptcy if it loses the case, Kelly said he “couldn’t fathom it.”

“All it would mean is that we would have to pay the higher interest rates,” he said. “We are doing significantly better in Vicksburg and Bossier City than Isle of Capri ever did. We’re still continuing to grow, and we’re expecting to complete our renovations in July.”

The company has said $18.5 million will be spent on complete redesigns of the Vicksburg and Bossier City casinos.

Chief Judge Stephen V. Callaway is presiding over the federal case, for which a preliminary hearing is set Friday at the U.S. Bankruptcy Court for the Western District of Louisiana in Shreveport.

Legends Gaming is a privately held company based in Frankfort, Ill., and it owns and operates no casinos other than those in Vicksburg and Bossier City.