San Jose Casino News Source: http://www.mercurynews.com/
By Rodney Foo
Mercury News
A plan to reorganize the debt-ridden Garden City Casino has been approved by a U.S. Bankruptcy Court in San Jose, a major step toward returning the city's oldest cardroom to solvency after it sought Chapter 11 protection nearly eight years ago.
The plan calls for a group of prospective buyers from Contra Costa County to buy the 60-year-old club for about $21.5 million, money that will be used to pay off dozens of creditors.
The South Saratoga Avenue club has been overseen by a federally appointed trustee and will not change hands until the buyers -- Dina DiMartino of Alamo, and Peter and Jeanine Lunardi, and Eric Swallow, all from Diablo -- obtain gaming licenses from the state and the city. The licensing process could take nine months, said the club's trustee, Frederick S. Wyle.
The buyers could not be reached for comment Friday.
The plan won approval from Judge Marilyn Morgan on Tuesday after the buyers resolved the city's concerns about payment of $1.59 million, the unpaid remainder of a $5 million fine imposed by police after various illegal activities, including skimming, were uncovered at the club in 1993.
The fine, coupled with mounting rent owed to landlords Irene and Ernest Pestana, forced Eli Reinhard, who took over the club in late 1993, to file for bankruptcy in July 1998. The filing freed Garden City from threats of lawsuits, but it forced the club seek the court's approval on management matters.
In March, city attorneys objected to the reorganization plan's interest rate and five-year payment schedule.
Eventually, the plan was changed so that the city will be paid $500,000 as soon as the new owners take over. The remaining fine of more than $1 million will be paid in equal installments, plus 12 percent interest annually on the unpaid balance, over 28 months.
``The important thing is we are going to get paid in a fairly short time,'' City Attorney Rick Doyle said.
Of all the creditors, only the city will receive all of what it sought, attorneys said.
``Everybody took a slight haircut, but the city did not,'' Wyle said.
Creditors will be paid 75 cents on the dollar when the deal is closed and get the remaining 25 cents if the casino meets performance criteria, said attorney Michael A. Isaacs, who represented creditors.
Together, the amounts owed to secured and unsecured creditors exceeded $20 million, excluding fees for administrative expenses.
The Pestanas, who sought more than $20 million in unpaid rent, will get $14.1 million when the deal is closed and an additional $2 million over four years, said attorney Peter J. Benvenutti, who represented Wyle and the casino.
Wyle said the new owners have pledged to ``substantially hire'' all the 623 employees at their prevailing wages.
The future of the casino remains clouded. The city wants to enforce a curfew on the 24-hour operations at Garden City and at its rival, Bay 101, on Bering Drive, and impose restrictions on betting.
Both casinos say the new rules would drive them under and represent an unconstitutional taking of their business. The cardrooms have taken the issue to court.
Meanwhile, city officials say they have a right to regulate gaming. Mayor Ron Gonzales has gone on record against the cardrooms, saying he would prefer to see the clubs closed because of their effect on chronic gamblers and their families.
Officials from the clubs and the city are to meet in court in August to set a trial date.
The buyers know about the pending litigation and its possibly dire ramifications, Benvenutti said.
``The buyers have accepted that risk,'' he said.
|
|
World Casino Directory 
Gambling Forums 
