Creditors and casino are due in court on Monday
Greektown Casino may halt operations unless it gets bankruptcy court approval to borrow another USD 46 million to stay open and finish its new 400-room hotel, according to a court filing.
Creditors are balking at the terms of the financing, which includes millions of dollars in additional fees, calling the terms astounding.
The creditors and Greektown appear to be heading for a showdown in U.S. Bankruptcy Court in Detroit on Monday. „The additional financing appears to be entirely overreaching and unreasonably favorable to the lenders,“ the creditors committee said in a motion filed Friday. „The management board’s approval of the additional financing raises serious questions as to whether the board has reasonably exercised its business judgment in this regard.“
Joel Applebaum, an attorney at Clark Hill who represents the creditors, said Friday that creditors are concerned about the cost of the new request.
„The fact they need some additional financing is not completely unexpected,“ Applebaum said.
Greektown, which filed for bankruptcy in May, has received USD 150 million in loans to operate under bankruptcy protection but says it needs to borrow more to complete the hotel for its scheduled opening on Feb. 12.
Roger Martin, a Greektown spokesman, said the financing package request, which Greektown filed with the court on Thursday, is good news.
„It ensures the completion of the project,“ Martin said.
Greektown owes Jenkins/Skanska Venture LLC — the general contractor on the hotel — USD 20 million for work performed on the new complex and anticipates $ 26 million more is needed to complete construction.
Without the additional financing there is „a real risk that Jenkins/Skanska will walk off the job“ before it is complete, Greektown said in a court filing Thursday.
Greektown said the fees and financing terms have increased because of the turmoil in the credit markets.
Monday’s hearing is before U.S. Bankruptcy Court Judge Walter Shapero. Both the court and the Michigan Gaming Control Board must approve the request.
Rick Kalm, executive director of the Michigan Gaming Control Board, said the board will likely take up Greektown’s request at its Feb. 10 meeting. He said the board won’t act until the bankruptcy court makes a ruling.
Greektown’s creditors, in their court documents, also alleged the casino could have sold property not part of the casino’s core business. A sale would have netted the casino about USD 8 million. Attorneys for Greektown did not return calls for comment Friday afternoon.
For years, Greektown has been the poorest performer of Detroit’s three casinos. In December, Greektown’s revenue dropped 12.76% compared with the same period last year. MotorCity Casino’s revenue dropped 11.52% and MGM Grand’s dropped by 2.47%.