DiamondJacks creditors approve bankruptcy exit

JACKSON, Miss. (AP) -- Having failed in an attempt to sell the two DiamondJacks casinos to an Oklahoma Indian tribe, creditors are bringing the Bossier City, La., and Vicksburg, Miss., gambling halls out of bankruptcy themselves, hiring Mississippi's Foundation Gambling Group to try to improve operations.

DiamondJacks owner Legends Gaming filed for bankruptcy reorganization almost a year ago, with creditors ultimately claiming more than $500 million in debts. The Vicksburg casino employs more than 350 people, according to recent numbers reported to regulators. The Bossier City casino employs more than 600.

Creditors approved the reorganization plan in June, although an official date to exit bankruptcy hasn't been set. As part of the deal, holders of $181 million in first lien debt will accept $80 million in new bonds, recovering about 46 percent of their losses. Holders of $116 million in second-lien debt will get nothing, while those who are owed $215 million in other debt will get only $40,000.

Current shareholders would also get nothing. Former Chicago-area gas station owner William McEnery owned 92 percent of Legends Gaming. His Gas City stations were sold off in bankruptcy court in 2011 and McEnery has been forced into personal bankruptcy as well. Under the plan, the reorganized Legends will pay McEnery $200,000 over the course of the year for consulting.

Legends Gaming Chief Financial Officer Raymond Cook did not return phone calls Monday seeking comment. Cook would be paid $210,000 over the course of a year as a consultant and allowed to seek other casino jobs.

Documents filed with the U.S. Bankruptcy Court in Shreveport show the reorganization was a better deal for creditors than liquidating the company, which would bring in an estimated $57 million for creditors, versus the $86 million total projected to be recovered through the current plan.

All but two creditors voted to accept the deal, according to bankruptcy court papers. Bondholders of the new company will include Wayzata Opportunities Fund, Fortress Credit Opportunities Husky Loan Co. of Luxembourg, Bank of America and Wells Fargo. The $80 million in five year-bonds that those companies will hold will pay 10 percent annual interest. Creditors will be able to acquire shares in the new company and will get to approve its budgets, court papers show.

It would cost more than $666,000 a month to make the payments on the debt. In May, the gambling halls cleared about $1 million in operating profits before depreciation and amortization. But court papers indicate that the company needs to spend money to upgrade its casinos and acquire new slot machines. A consultant last year described the operations as "extremely outdated" and in "woeful" condition.

In most months, DiamondJacks is last by revenue of casinos in the Shreveport-Bossier City market. There, a Margaritaville casino is supposed to open later this month, bringing new competition. Casino revenues in Mississippi have been in decline statewide.

Legends also filed for bankruptcy in 2008, but even after it cut interest rates on its debts, it couldn't make the payments.

The creditors chose Foundation, of Gulfport, Miss., to manage the casinos when they exit bankruptcy. Legends signed a contract with Foundation in April, agreeing to pay $30,000 a month plus up to $2,500 in expenses. Foundation is currently running Bally's Casino Tunica and Resorts Casinos Tunica in northern Mississippi. A lender foreclosed on both gambling halls in 2011.

Global Gaming Solutions, a unit of the Chickasaw Nation of Oklahoma, had offered to buy DiamondJacks for $125 million. But the tribe backed out of the deal, saying Legends' lack of investment in the casinos led to a business decline, breaking the deal, and Global should get back its $6.25 million deposit. Legends countersued, saying Global's exit was a breach of contract, demanding to keep the $6.25 million as well as further damages. Those issues are still being fought over in court.

Both DiamondJacks' properties were the first casino in their respective cities when opened by the Isle of Capri. Vicksburg opened in 1993 while Bossier City opened in 1994. Isle of Capri sold the gambling halls to privately-held Legends in 2006.

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