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Hospitality, Gaming & Leisure

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Around the globe, the economic recession challenged most industries, including the gaming and hospitality industry. Even the strongest gaming operators faced difficult decisions such as employee layoffs and reevaluating plans to construct new properties or complete partially finished casino and hotel expansion projects. All stakeholders in the industry dealt with unprecedented challenges.

One unmistakable lesson of the downturn is that the gaming and hospitality industry is no longer recession-proof. Many properties previously financed by easily obtainable, covenant-light loans experienced dire consequences stemming from their inability to pay debt-service obligations when due in light of declines in operating performance. While some companies still face these challenges, with an improving economy, stronger operators are looking to take advantage of opportunities to grow, both organically through improved performance and via acquisition.

Conway MacKenzie is well positioned to assist all stakeholders in the industry. Our team of experienced turnaround professionals has in-depth knowledge of restructuring options, performance improvement and transaction strategies.

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Rejuvenated. Revitalized. Restructured.

The Engagement

Conway MacKenzie was engaged to assist a large casino.

Our Role

Conway MacKenzie provided financial and restructuring advisory services for over two years. Conway MacKenzie’s actions were integral in securing approximately $200 million in post-petition debtor-in-possession financing which the casino needed in order to proceed with construction necessary to complete its permanent casino and hotel complex.

Prior to the Chapter 11 filing, the state’s Gaming Control Board had threatened to force a sale of the casino due to violations of a financing order. Conway MacKenzie established order and spent a significant amount of time working to align all interests so that the casino could proceed with a Chapter 11 bankruptcy filing and obtain the financing necessary to complete the permanent casino and hotel complex, as opposed to being forced to conduct a sale of an incomplete casino complex which likely would have severely impacted recoveries to creditors and threatened significant job losses.

Construction of the permanent casino and hotel complex had almost completely stopped due to delayed payments to contractors. Conway MacKenzie worked closely with the general contractor, led multiple rounds of negotiations and oversaw completion of the project. This resulted in construction being completed on time and under budget.

Completion of the permanent casino and hotel complex, along with the negotiation of a settlement agreement with the city after multiple rounds of litigation, enabled the casino to apply for and receive a 5% reduction in gaming taxes paid to the city and state, which resulted in a benefit of approximately $20 million per year.

Conway MacKenzie worked with the existing equity holder and its board representatives to provide ample opportunities for them to play a role in the Chapter 11 reorganization, but also was successful in reconstituting the board to provide additional independent directors. Conway MacKenzie also facilitated the hiring of an independent, third-party management company.

During the engagement, all while there was a major economic meltdown occurring both nationally and locally, Conway MacKenzie assisted management in identifying significant cost saving and profit enhancement opportunities which led to a dramatic turnaround in regard to the casino’s performance. Market share grew from approximately 22% to approximately 27% and 2009 EBITDAR of over $70 million significantly exceeded 2008 EBITDAR of over $50 million.

Conway MacKenzie also assisted with a lengthy sale process and developed and filed a Joint Plan of Reorganization, together with the Prepetition Secured and DIP Lenders. Subsequently, Conway MacKenzie worked closely with the Noteholder Plan Proponents to pursue the consummation of an enhanced Plan of Reorganization, which further maximized recoveries for creditors.

The Result

As a result of Conway Mackenzie’s involvement, the casino is thriving, having emerged from bankruptcy in 2010. The tremendous success of this engagement is evidenced by the dramatic increase in the enterprise value of the casino. When the property was initially valued, the enterprise value approximated $375 million. The company’s Plan of Reorganization valued the enterprise in excess of $650 million. Additionally, the Prepetition Secured bank debt, which once traded in the low 20s, was settled on the Effective Date for par + accrued of 112.

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