Greektown Casino almost out of cash, documents show

Allegations are ‚wild speculation,‘ company says

Greektown Casino is expected to run out of cash in December, hampering its ability to continue operating or to finish building its new hotel, which is slated to open in February, according to documents filed by the Michigan Gaming Control Board.

The board that oversees Detroit’s three casinos filed documents in U.S. Bankruptcy Court on Friday asking that a judge deny the casino’s request for a 60-day extension to file a plan to exit bankruptcy.

“No reasonable person can believe that this 60-day period will markedly change the debtors’ refinancing or sale prospects except to diminish them due to continued deterioration of its operations and the credit markets,” according to the documents.

In court documents, the board alleges that the casino’s financial position is deteriorating at an alarming rate and that the casino will not be able to file a viable plan of reorganization. That deterioration will increase the likelihood that the board will put the casino up for sale, revoke its license or deny its renewal. The casino’s license expired in August.

The board has the power to appoint a conservator to run the casino and direct the sale of the property if a casino license is not renewed, or is revoked or
suspended, it said in court documents.

The Gaming Control Board’s motion was one of several filed Friday objecting to the casino’s request to extend a deadline to file a bankruptcy exit plan.

In response to those, attorneys for Greektown filed a motion Sunday in support of an extension, claiming that allegations against Greektown are false and misleading.

Greektown Casino spokesman Roger Martin today called the allegations that Greektown was running out of money “wild speculation.”

“It’s just not true,” he said.

In documents filed Friday, the board alleged the following:
  • Greektown will need additional lending or equity to both continue operations — including paying regulatory fees of both the state and the city — and to complete the hotel.
  • The casino failed to meet its financial projections and the financial covenants required by both the board and Debtor in Possession financing. This has created a significant cash problem for Greektown.
  • The casino is expected to continue violating financial benchmarks through 2011.
  • Conway MacKenzie & Dunleavy, a financial consulting firm that advises Greektown, has told a board analyst that Greektown cannot guarantee that it will have sufficient cash to pay construction costs after December.
  • Greektown has been in regulatory breach for almost eight months and has recognized that it would be in default for two years with no projected end in sight.
  • Over the next four months, the casino must generate USD 22.3 million in order to complete construction after payment of a USD 10-million regulatory fee to the Michigan Gaming Control Board.
  • In addition, Greektown will have to pay a municipal service fee of USD 4 million prior to the time the hotel construction is complete. This will add an additional burden to the Greektown’s cash flow. The Gaming Control Board has been notified by Greektown that it has had to draw down USD 15 million of Debtor in Possession financing to pay the Gaming Control Board regulatory fee, a municipal fee and operational costs.
Greektown consultant Conway MacKenzie & Dunleavy has testified that part of the cost overruns related to the hotel construction would have to come from this money, which is now exhausted.

Further, according to documents, the Gaming Control Board says it is unaware of any substantial steps that Greektown has made to negotiate with creditors, with the exception of retaining an investment banker. “Most of the constituents with whom the board has communicated have indicated that the debtors have had no meaningful discussions with respect to reorganization,” documents said.

Greektown is expected in U.S. Bankruptcy Court today.