Greektown Casino falls into Chapter 11

By Margarita Bauza and Brent Snavely
Detroit Free Press

DETROIT — “We are not closing, we are not bankrupt,” said spokesman Roger Martin. "We are a profitable company with a liquidity issue."

Greektown Holdings L.L.C., along with seven other related entities, filed Chapter 11 bankruptcy petitions with U.S. Bankruptcy Court in Detroit Thursday, saying it is unable to borrow more money and has hit massive cost overruns as it attempted to expand its Detroit casino.

“Significant delays and cost overruns in connection with the completion of the expanded complex have adversely affected Holdings’ businesses, Greektown Casino’s operations and Holdings’ financial condition and cash flow,” Greektown said in its bankruptcy filing.

Greektown said it estimates that it needs approximately $140 million of additional borrowings or equity contributions to complete the expansion.

Failure to complete the expansion, Greektown said, would result in a default of its development agreement, and would hinder Greektown Casino’s ability to compete.
Greektown, in its court documents, said it was forced to file for Chapter 11 bankruptcy because it is out of compliance with the terms of its line of credit with Merrill Lynch Pierce Fenner and Smith.

As of March 31, Greektown said it owed its lender $314.5 million, and because it is on the brink of being out of compliance with the terms of the loan, it is unable to draw additional funds and has limited ability to borrow additional money.

Greektown recently obtained a wavier from its bank, allowing it to operate until June 30, but the bank also has required Greektown to find an infusion of capital from another owner. However, Greektown said it has been unable to do that, and said the wavier is due to expire June 30.

As a result, Greektown said, all outstanding debt obligations could become currently due in 2008.
“As we reorganize our business and complete our permanent casino construction with additional financing, the goal is a bigger and more viable Greektown Casino,” said casino Management Board Chairman Tom Miller, who is also a member of the Sault Tribe Board of Directors. “As we work through the reorganization process, the casino will continue to operate normally for all guests, player’s club members, employees, vendors, suppliers and contractors.”

Chapter 11 protection allows a company to reorganize its financial structure under the supervision of the U.S. Bankruptcy Court.

Martin told the Free Press the Casino is in the final stages of securing a $150 million loan for operations and to complete the construction of its 400-room hotel and gaming floor expansion.

Martin said talks continue with the Bloomfield Hills based Entertainment Interest Group that intends to purchase a 40% stake in the casino for $79 million.

In November, Greektown Casino opened an attached parking structure, marking the completion of Phase 1 construction work on the new permanent Greektown casino.

Phase two, construction of the casino’s 400-room hotel and expanded gaming floor, is scheduled to be completed in phases in the coming months.

The permanent casino and hotel will include a multi-purpose theater, buffet, three restaurants, and 25,000 square feet of additional gaming space.

Total investment in the permanent Greektown Casino project will be about $500 million.

Greektown Casino, while profitable, has consistently lagged behind its competition in revenues. In 2007, Greektown said its total revenue was $314.6 million, but its net income was just $2 million.

According to the filing, Kewadin Greektown Casino LLC owns 50% of the casino’s shares while Monroe Partners LLC owns the other 50%. Kerwadin is owned by the Kewadin Casinos Gaming Authority, which, in turn, is owned by the Sault St. Marie Tribe of Chippewa Indians. Ninety-seven percent of Monroe is owned by Kewadin, 2% by Ted Gatzaros, .5% by Marvin Beatty, .06% by Dr. Anthony Harris and .25% by Hills Howard.