Majestic Star creditors seek right to sue
The creditors' committee of Majestic Star Casino LLC have a hearing scheduled for April 27 where they will argue for authority to sue secured lenders on a theory that the security interests in two riverboat casinos in Gary, Indiana, are defective.
Although the company waived the right to challenge liens as part of an agreement for financing, Majestic Star suggested in an April 20 court filing that the judge not rule on the motion for at least 90 days.
The delay in ruling, according to the casino operator, would "allow the parties to settle the claims."
Originally, the committee contended that the floating casinos are no longer vessels because they are now permanently attached to the land. To have valid security interests, the committee originally argued that liens must have been perfected as fixtures.
After reading the lenders' analysis of the legal issues, the committee changed its theory, now contending that the floating casinos are actually real estate. Since no mortgages were filed, the committee argues the liens are invalid.
The secured lenders countered by saying that the new theory comes too late by having been submitted a month after the deadline for attempting to invalidate security interests.
The committee is seeking to void liens not only of the first-lien banks but also of the second-lien noteholders.
Majestic Star filed under Chapter 11 in November. It has four casinos in total, plus hotels with 806 rooms serving the two riverboat casinos in Gary, Indiana. The other casinos are in Tunica, Mississippi, and Black Hawk, Colorado.
Debt includes $79.3 million owing on the senior secured credit facility, with Wells Fargo Capital Finance Inc. as agent. Senior secured noteholders with a second lien are owed $300 million. Majestic Star owes $200 million on unsecured senior notes and $63.5 million on discount notes. Assets were $406 million and debt was $750 million in the quarterly report for the period ended June 30.
The case is In re Majestic Star Casino LLC, 09-14136, U.S. Bankruptcy Court, District of Delaware (Wilmington).