FX Real Estate units' first-lien lenders to back pre-packaged plan; Las Vegas property to be sold

By Caroline Salls

Pittsburgh, Nov. 5 - FX Real Estate and Entertainment Inc. said its Las Vegas subsidiaries have entered into a lock-up and plan support agreement with the first-lien lenders under their $475 million mortgage loans and two corporate affiliates of directors, executive officers and or 10% stockholders Robert F.X. Sillerman, Paul C. Kanavos and Brett Torino.

According to an 8-K filed with the Securities and Exchange Commission, FX Real Estate will make a pre-packaged Chapter 11 bankruptcy filing on Nov. 16 in the U.S. Bankruptcy Court for the District of Nevada to dispose of its Las Vegas property to benefit the subsidiaries' creditors either under an auction sale for at least $256 million or a sale to the corporate affiliates.

As has been previously reported, the Las Vegas subsidiaries are in default on the $475 million mortgage loans secured by their Las Vegas property, which is substantially the company's entire business.

On Oct. 15, the first-lien lenders agreed to adjourn the latest scheduled trustee's sale of the Las Vegas property to Nov. 18 to allow continued discussions regarding the mortgage loan default.

According to the 8-K, the Las Vegas subsidiaries will be merged into one surviving entity.

Prearranged sale

Under the prearranged sale to LIRA Property Owner, LLC, one of the affiliates, LIRA would acquire the Las Vegas property for $260 million during the bankruptcy case.

In addition, FX said the first-lien lenders will finance the prearranged sale to LIRA by entering into a new secured loan.

Under the loan agreement, LIRA will post a $2.2 million deposit before the bankruptcy filing, and it will fund up to $650,000 of expenses during the case.

The company said LIRA will pay roughly $15 million in cash at closing.

FX said its equity sponsors will have to provide a $60 million "bad boy" guarantee, which will decrease over time to $20 million, in the event of a voluntary or collusive bankruptcy filing and/or misappropriation of funds.

If there is a fault-based termination of the lock-up agreement, the new entity will forfeit its $2.2 million deposit to the first-lien lenders and be obligated to pay the first-lien lenders an additional $650,000 as liquidated damages.

Receivership to end

As previously reported, the Las Vegas property has been under the exclusive control of a court-appointed receiver, at the request of the first-lien lenders, since June 23. The receiver will be discharged with the bankruptcy filing, and the receivership of the Las Vegas property will terminate.

Subscription agreements

FX said it entered into subscription agreements on Thursday with some of its directors, executive officers and greater than 10% stockholders under which the purchasers have agreed to buy a total of 4.17 million units at a purchase price of $0.09 per unit.

Each unit consists of one share of the company's common stock, a warrant to purchase one share at an exercise price of $0.10 per share and a warrant to purchase one share at an exercise price of $0.11 per share.

FX said the warrants are exercisable for a period of seven years.

The company said the total proceeds from the sale of the units will be $375,000, and the funding of each purchase is expected to take place by Nov. 6.

FX said it intends to use the proceeds to fund working capital requirements and for general corporate purposes.

FX Real Estate and Entertainment is based in New York and is focused on the development of real estate and entertainment-based projects and attractions.

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