FX Real Estate Las Vegas unit enters new plan support, sale agreement

By Caroline Salls

Pittsburgh, Dec. 24 - FX Real Estate and Entertainment Inc.'s remaining Las Vegas subsidiary has entered into a lock-up and plan support agreement with its first-lien lenders, some second-lien lenders and the first-lien and second-lien agents on its $475 million of mortgage loans, according to an 8-K filed with the Securities and Exchange Commission.

LIRA LLC is also a party to the agreement. LIRA is a corporate affiliate of directors, executive officers and stockholders Robert F.X. Sillerman, Paul C. Kanavos and Brett Torino.

FX said the new agreement differs from the subsidiary's existing lock-up and support agreement in that the first-lien lenders and the participating second-lien lenders are both parties to it, and the subsidiary's Las Vegas property will be sold in a pre-arranged sale, not conditioned on an unsuccessful public auction, to an entity co-owned by the equity sponsors and the participating second-lien lenders.

The new agreement will be implemented under a pre-packaged Chapter 11 bankruptcy case to be filed by the Las Vegas subsidiary.

Sale terms

Under the pre-arranged sale, the entity co-owned by the entity co-owned by the equity sponsors and the second-lien lenders will acquire the Las Vegas property for $260 million.

Upon entry into the new lock-up agreement, the equity sponsor group and the second-lien lender group each deposited $6.5 million of cash and letters of credit into escrow.

The first-lien lenders will finance the pre-arranged sale by entering into a new secured loan with the buyer as the borrower.

FX said the loan will be for an initial term of six years, with three one-year extensions; at closing, it will pay $10 million in cash from the $13 million deposit, and it will prefund a minimum of $3 million of reserves.

The loan may have to fund or assume some expenses, interest accruals and other items to the extent not paid from the cash flows generated by the Las Vegas property's real estate activities.

In addition, the equity sponsors and second-lien lenders will have to provide "bad boy" guarantees in case of a voluntary or collusive bankruptcy filing and/or misappropriation of funds.

The new lock-up agreement will terminate on Jan. 22 if the parties have not agreed to the definitive terms of the key transaction documents needed to implement the pre-packaged plan of reorganization.

Under the agreement, the plan of reorganization must take effect by May 15.

Upon filing of the pre-packaged bankruptcy case, the court-appointed receiver will be discharged, and the receivership of the Las Vegas property will terminate.

If the Las Vegas property is sold under the new lock-up agreement, FX LLC will be released from its "bad boy" guarantees in favor of the first-lien and second-lien lenders, guaranteeing repayment of all obligations outstanding under the $475 million mortgage loans.

Standstill agreement

In addition, FX said the parties to the existing lock-up agreement have entered into a standstill agreement to defer and stay activity required under the existing lock-up agreement until the new agreement is validly terminated.

Under the standstill agreement, the first-lien agent has agreed to delay the pending trustee's sale of the Las Vegas property to a date after Feb. 1.

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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