GB Holdings files for Chapter 11 as $43.7 million of notes mature

New York, Sept. 29 - GB Holdings, Inc. filed for Chapter 11 in the U.S. Bankruptcy Court for the District of New Jersey because it did not have the money necessary to repay its $43.7 million 11% notes when they became due on Thursday.

GB Holdings has no operating activities and its only significant asset is 2.88 million shares of Atlantic Coast Entertainment Holdings, Inc.'s common stock, a 28% stake.

GB previously guaranteed $110 million of the 11% notes originally issued by GB Property Funding Corp. but after a series of corporate transactions ended up itself as the borrower on $43.7 million of the notes.

In a filing with the bankruptcy court, the company said it has been unable to raise the funds to repay those notes by selling its Atlantic Coast Entertainment stock or obtaining new borrowings nor has it been able to refinance them.

The Chapter 11 filing is intended to maximize the value of its Atlantic Coast Entertainment stock - and along with its petition the company asked to hold an auction to sell that stake.

GB also said in the filing that the performance of the Sands Hotel and Casino in Atlantic City, N.J., operated by Atlantic Coast Entertainment, has deteriorated recently and its EBITDA has been "well below expectations."

However in a press release, Atlantic Coast Entertainment described the Sands as "fiscally sound with very little debt." It intends to expand to add up to 1,000 rooms.

In its Chapter 11 filing, GB listed assets of $10 million to $50 million and debts of $47.3 million.

Wells Fargo as indenture trustee was listed as the largest unsecured creditor with a claim of $43.74 million. Other large unsecured creditors are all bondholders: Harbert Distressed Investment 0247, Master Fund Ltd. of New York with a $13.11 million claim, Triage Capital Management B LP 0307 of Bala Cynwyd, Pa., with a $5.93 million claim, Triage Capital Management LP 0307 (USD Account) of Bala Cynwyd, Pa., with a $3.99 million claims, Royal Bank of Canada of New York with a $2 million claim and Cragswood Ltd. of Saddle River, N.J., with a $1.05 million claim. All other claims were below $1 million.

Carl Icahn's American Real Estate Holdings, LP owns 77.5% of the voting securities and Robino Sorintino Holdings, LLC has 16.1%.

In its court documents, GB said some holders of the 11% notes have alleged the various recent corporate transactions may constitute a fraudulent transfer. Saying there were no objections at the time they were carried out, GB said "it appears that this recent assertion by the 11% noteholders is merely a negotiating strategy."

Under the proposed auction of the Atlantic Coast Entertainment stake, Libra Securities LLC will carry out marketing. Deadlines have not yet been set.

The filing is GB's second. It previously exited Chapter 11 in August 2000.

GB's case number is 05-42736.

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