Majestic Star Casino files bankruptcy following loan acceleration

By Caroline Salls

Pittsburgh, Nov. 23 - The Majestic Star Casino, LLC filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware after payment of its senior secured credit facility was accelerated.

According to a statement filed by senior vice president and chief financial officer Jon S. Bennett, the administrative agent for the company's senior secured credit facility accelerated all amounts due under the facility and terminated Majestic Star's ability to borrow on Oct. 30.

Bennett said the company believes a consensual restructuring of its long-term debt is still possible, and some senior secured noteholders have continued restructuring talks after the credit facility was accelerated.

Bennett said Majestic Star filed bankruptcy to preserve its going-concern value and "to protect the debtors' operations from any improvident actions by creditors."

In connection with the bankruptcy filing, Majestic Star has requested court approval to use the cash collateral of its pre-bankruptcy secured lenders to fund its operations while in bankruptcy.

Absent a final order, the cash collateral use will expire on Dec. 18. The company said the expiration date will be extended for a period of 12 months from the date of the entry of the final order.

Cash collateral objection

Indenture trustee the Bank of New York Mellon Trust Co., NA objected to the cash collateral use, arguing that the proposed cash collateral order does not grant the trustee any protection against post-bankruptcy diminution in value of its collateral.

"Indeed, the debtors' proposed interim order does not even acknowledge the existence of the roughly $350 million secured noteholder claims that are secured by a blanket second lien on substantially all of the debtors' assets," the trustee said in the objection.

"This egregious behavior is merely the latest element of what is clearly a concerted strategy of these debtors to stall, delay and stonewall in the hope that woefully out of the money equity can extract some recovery out of the pockets of the debtors' secured and unsecured creditors."

Debt details

According to court documents, Majestic Star had $402.11 million in assets and $771.11 million in debt at Oct. 31.

The company's largest unsecured creditors include:

• Lehman Brothers, Inc. Reorg. of Jersey City, N.J., with a $46.33 million senior notes claim;

• Goldman Sachs & Co. of Jersey City, N.J., with a $38.45 million discount notes claim;

• The Bank of New York Mellon of Pittsburgh, with a $34.11 million senior notes claim;

• SSB&T/Client Custody Services of North Quincy, Mass., with a $27.31 million senior notes claim and a $17.9 million discount notes claim;

• Goldman Sachs Bank USA of New York, with a $25.12 million senior notes claim;

• Pershing, LLC Securities of Jersey City, N.J., with a $23.39 million senior notes claim;

• J.P. Morgan Clearing Corp. of Brooklyn, N.Y., with a $16.74 million senior notes claim;

• Banc of America Securities, LLC of New York, with a $12.09 million senior notes claim;

• City of Gary, Ind., with a $7.45 million city incentive/development claim; and

• Wells Fargo Bank, NA of Minneapolis, with a $5 million senior notes claim.

Majestic Star is a Las Vegas-based owner and operator of casino hotels. Its Chapter 11 case number is 09-14136.

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