Majestic Star Casino LLC on Thursday won confirmation of its Chapter 11 reorganization plan after striking deals to end a long-running dispute with the city of Gary and broker peace with tax authorities.
Judge Kevin Gross signed off on the restructuring scheme for Majestic Star at a hearing in the U.S. Bankruptcy court in Wilmington, Del., clearing the way for some of the casinos controlled by Detroit mogul Don Barden to move ahead without him.
Confirmation was a quiet end to a contentious case, which had unsecured creditors jousting with higher-ranking lenders over liens on riverboat casinos and which had Indiana authorities up in arms. The Chapter 11 plan calls for the company to reorganize around casinos in Gary; Tunica, Miss.; and Black Hawk, Colo.
As late as Wednesday, Majestic Star was bargaining with Gary over the city’s cut of revenue from some of its casino operations.
Gary, which had objected to confirmation of Majestic Star’s plan, dropped its opposition after the company agreed to resume making payments under a development agreement, Majestic Star attorney Stephen Hessler announced at the confirmation hearing.
Details of the deal with the city will be spelled out in formal documents, said Hessler of Kirkland & Ellis. The company has been making development agreement payments into a special account since February 2008, when the dispute with Gary arose.
A tax fight with Lake County, Ind., will continue, but the county agreed to d let confirmation proceed uncontested. The dispute focuses on the proper assessed value for two riverboat casinos.
Barden’s companies lose their stake under the plan approved Thursday, while creditors take over. Court documents indicate Wayzata Investment Partners is slated for a major role in Majestic Star’s future, holding two of five seats on the board.
Barden couldn’t immediately be reached for comment Thursday.
The Chapter 11 plan cuts Majestic Star’s debt to $160 million from $735 million, mostly by swapping out debt for equity.
Banks owed $63.5 million will be paid in full, with a new loan and cash. Second-lien lenders owed $348 million get 58 percent of the equity and either notes or cash, if the notes are refinanced. Senior bondholders owed $233 million get 42 percent of the reorganized company, or about 25 percent of what they are owed.
Owed about $4 million, general unsecured creditors will also get a recovery of about 25 percent, Hessler said.
Majestic Star is one of several gambling companies that took cover in bankruptcy due to the recession. It filed for Chapter 11 in November 2009.
