Las Vegas Monorail, bond trustee in bankruptcy talks amid defaults

By Caroline Salls

Pittsburgh, Dec. 11 - Las Vegas Monorail Co. is in talks with the trustee and bond insurer for the State of Nevada Department of Business and Industry's Las Vegas Monorail Project revenue bonds regarding a potential pre-negotiated bankruptcy reorganization, according to a notice to bondholders from bond trustee Wells Fargo Bank, NA.

According to the notice, Las Vegas Monorail is in default on the financing arrangement related to the revenue bonds for failing to deposit enough operating revenues to pay scheduled debt service on the bonds.

Wells Fargo said it was forced to withdraw funds from first-tier and second-tier debt service reserve accounts to make up the deficiencies in the debt service funds.

Specifically, the trustee said there was not enough money in the first-tier debt service fund to make a $9.63 million interest payment due July 1 on the first-tier bonds and not enough in the second-tier debt service fund to make a $5.49 million interest payment due July 1 on the second-tier bonds.

Wells Fargo said it was able to use the reserved funds to make the first-tier bond payment in full, but it was only able to make a partial $1.8 million payment on the second-tier bonds.

Since then, Las Vegas Monorail has not provided any revenues to replenish the debt service reserve funds.

Wells Fargo said the principal and interest on the first-tier bonds due Jan. 1 in the amounts of $16.76 million and $5.49 million, respectively, are due on the same date as the payment on the second-tier bonds.

Since the company's failure to fund the debt service requirements is expected to continue, the trustee said there will not be enough cash to make these payments.

As a result, Wells Fargo said it will make a demand on the first-tier surety reserve bond insurer to fully fund the shortfall on the first-tier bonds.

If there are still insufficient funds to make the second-tier bond interest payment, the trustee said another payment default will occur.

If Las Vegas Monorail does file bankruptcy, the trustee said an automatic stay could be imposed on any judicial or other proceeding against the borrower's property.

Co-trustee request

In addition, Wells Fargo said it has asked the District Court of Hennepin County, Minnesota to appoint a co-trustee in connection with the administration of Las Vegas Monorail's estate.

The trustee's petition seeks instruction from the court on the appointment of a qualified corporate trust administrator to act as co-trustee and successor trustee for the second-tier bonds in order to resolve a possible conflict of interest under the senior bond indenture.

Wells Fargo said a conflict could arise if it continues to administer the trust estate for the different tiers of bonds in light of the existing defaults caused by Las Vegas Monorail's failure to deposit revenues to pay debt service on the bonds.

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