The Work

November 24, 2009 1:16 PM

Bankruptcy Files: The Casino Edition

Posted by Zach Lowe

You know it's been a rough year when casinos are going bankrupt. And that's exactly what's happening.

On Tuesday, Kirkland & Ellis landed work as the lead debtor's counsel for Majestic Star Casino, which filed for bankruptcy related to its two casinos in Gary, Ind. and other facilities in Tunica, Miss. and Black Hawk, Colo.

James Sprayregen, the lead Kirkland partner on the case, says he began working with Majestic owner Don Barden during the two years he spent at Goldman Sachs before returning to his perch as cohead of Kirkland's prestigious bankruptcy group last November. The Delaware bankruptcy boutique Pachulski Stang Ziehl & Jones will serve as Majestic's local counsel.

Barden, a well-known entrepreneur from Detroit, became the first African-American owner of a major Las Vegas casino when he purchased Fitzergalds Casino Hotel in 2001, according to this profile in Ebony. Fitzgeralds, since renamed Fitz Hotel & Casino, is not included in the Chapter 11 filing.

Majestic Star's filing lists $705 million in liabilities and $406 million in assets. Its biggest creditors include Lehman Brothers and the city of Gary, which is suing Majestic Star over a disputed payment plan that requires Majestic to pay a percentage of its gross revenue to the city, according to this story in the Post-Tribune of Northwest Indiana.

This isn't Kirkland's first gaming bankruptcy of the current economic crisis. The firm also handled the Chapter 11 filing of Tropicana Resort and Casino in Atlantic City, N.J. That case ended in June, when a group of lenders headed by Carl Icahn won a one-bid auction for the Trop.

In another casino-related bankruptcy, Icahn, represented by his usual outside counsel at Sonnenschein, Nath & Rosenthal, has won the right to be the stalking horse bidder for the bankrupt--and still unfinished--Fontainebleau casino project in Las Vegas. Icahn bid $155 million for the Fontainebleau, $10 million more than Penn National Gaming, according to The Wall Street Journal.

As our Am Law colleague Brian Baxter has reported, Kasowitz, Benson, Torres & Friedman has been representing Fontainebleau's parent company in litigation against several banks the Fontainebleau accuses of reneging on loans to finance the stalled Vegas project.

Florida-based Bilzin Sumberg is serving as debtor's counsel to Fontainebleau Las Vegas, and partner Scott Baena confirmed Sonnenschein is representing Icahn. Peter Wolfson, the lead partner on the case did not immediately return a message seeking comment. 

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