Hollywood Casino Shreveport's bondholder Black Diamond seeks to end exclusive period

By Ellen Chang

Houston, March 3 - Black Diamond Capital Management LLC, a bondholder of Hollywood Casino Shreveport, wants to terminate the company's exclusive right to propose a plan of reorganization, according to a Wednesday filing with the U.S. Bankruptcy Court for the Western District of Louisiana.

Black Diamond said the exclusivity should be terminated because it does not believe the company has maximized the value of the estates.

And Black Diamond said the plan put forward Nov. 2 is "in reality the plan of two bondholder creditors, AIG and TCW."

Black Diamond also said the plan is unconfirmable because it "fails to comply with the good faith and legal compliance requirements of" the bankruptcy code.

Black Diamond said its own offer to buy the casino is $23 million more than the Eldorado Resorts LLC offer, which forms the basis of the company's plan. Black Diamond also said "the debtors have breached their statutory fiduciary duties by refusing to accept and move forward with the materially superior offer made by Black Diamond."

For example, Black Diamond said its offer gives an initial $7.5 million cash investment, compared to Eldorado's $5 million investment. Its offer would have a $2.5 million annual management fee with no incentive compared to $2.5 million plus 15% above $20 million of EBITDA and 20% above $25 million of EBITDA.

In addition, Black Diamond will have both its $7.5 million investment and $28.25 million of pre-bankruptcy bonds at stake while Eldorado is only risking $5 million, which will be repaid through management fees before any bond payment is due.

Black Diamond is also willing to provide a $10 million secured revolving credit facility at Libor plus 250 basis points and pre-petition bondholders would be invited to participate. Eldorado does not offer a credit facility.

Black Diamond said it feels that it should be permitted to submit an alternative plan of reorganization to be considered by the creditors and court.

Hollywood Casino Shreveport owns and operates a riverboat casino and hotel complex located on the Red River in Shreveport, La. Black Diamond and other creditors filed an involuntary Chapter 11 case against the casino and resort company on Sept. 10. The Chapter 11 case number is 04-13259.

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