FX Real Estate unit to sell property in bankruptcy under October lock-up deal; new deal ended

By Caroline Salls

Pittsburgh, Feb. 18 - FX Real Estate and Entertainment Inc.'s remaining Las Vegas subsidiary's new lock-up and plan support agreement terminated automatically on Feb. 12 because the parties to the agreement were unable to agree on the form of the key documents needed to implement a pre-packaged plan of reorganization, according to an 8-K filed with the Securities and Exchange Commission.

FX said an Oct. 27 lock-up agreement will be reinstated because of the non-fault termination of the new agreement.

As previously reported, the parties to the agreement included the first-lien lenders and some of the second-lien lenders and the first-lien and second-lien agents under the subsidiary's $475 million mortgage loans.

LIRA LLC, a corporate affiliate of FX Real Estate directors, executive officers and/or greater than 10% stockholders Robert F.X. Sillerman, Paul C. Kanavos and Brett Torino, was also a party to the agreement.

Because the termination was not the fault of any specific party, the company said all parties were released from their respective obligations.

As a result of the non-fault termination of the new lock-up agreement, FX said the subsidiary's standstill agreement with the first-lien lenders, LIRA LLC and affiliate LIRA Property Owner, LLC has also terminated.

According to the 8-K, the standstill agreement was designed to defer and stay activity required under the parties' existing plan support and lock-up agreement dated Oct. 27.

Reinstated agreement

Under the October lock-up agreement, the Las Vegas subsidiary will make a pre-packaged Chapter 11 bankruptcy filing with the U.S. Bankruptcy Court for the District of Nevada to dispose of the Las Vegas property for the benefit of the subsidiary's creditors either under an auction sale for at least $265 million or a pre-arranged sale to LIRA under a plan of liquidation.

The property would be sold to LIRA only if it is not sold at auction.

The company said the standstill agreement parties are required to take action to move toward implementation of the existing lock-up agreement, including:

• To reinstate an escrow agreement by Feb. 27;

• To amend the existing lock-up agreement to specify the recalculated outside date on which the plan of liquidation can be confirmed, currently May 18, which under the terms of the standstill agreement is to be extended by the number of days from Dec. 4 through reinstatement of the escrow agreement; and

• To agree on new target dates for taking actions necessary to initiate the pre-packaged Chapter 11 filing.

In addition, FX said the first-lien lenders have agreed to delay the pending trustee's sale of the Las Vegas property to March 24.

Unit purchase

According to the 8-K, FX has also entered into subscription agreements under which some of its directors, executive officers and greater than 10% stockholders purchased a total of 99 units at a purchase price of $1,000 per unit.

Each unit consists of one share of FX's newly created and issued series A convertible preferred stock and a five-year warrant to purchase up to 10,989 shares of the company's common stock at an exercise price of $0.273 per share.

The $99,000 of proceeds from the sale of the units will be used 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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