A lack of profits didn't drive the Miami Jai-Alai Casino into
bankruptcy. The trigger for this week's Chapter 11 filing came after the
fronton's owners found out the business could be worth tens of millions of
dollars more than what they had agreed to sell it for, lawyers told a federal
bankruptcy judge Wednesday.
"We're definitely not a distressed company," Miami Jai-Alai lawyer Luis Salazar told Judge Robert A. Mark at an afternoon hearing. "We're kind of holding our own for a change."
As expected, Mark agreed to let the facility continue spending its cash on operations while owners, bankers and a potential buyer of the business fight it out in bankruptcy court.
Miami Jai-Alai's lender, ABC Funding, accused the company of trying to use the Chapter 11 filing as a way to undo a deal to sell the business to another casino investor for $130 million, about $50 million less than what an investment bank later said it was worth.
The hearing also illustrated the long, steep decline suffered by jai-alai in Miami, and how its extinction was averted by the opening of a casino at the fronton on the 3500 block of Northwest 37th Avenue early last year. Financial statements filed in court show the fronton's slot machines delivering $1.1 million in cash to the operation every week, while a top executive testified that running jai-alai matches brings a net loss of about $1 million every year.
"It's an enabler" was how the executive, Daniel Licciardi, described the jai-alai part of the operation. State law bars casinos outside Indian lands in South Florida, but in 2008 Miami-Dade voters approved an exemption allowing casino-type gambling in thoroughbred and greyhound tracks and jai-alai frontons.
Jai-alai is a high-paced game of Basque origin in which players use cestas (curved wicker baskets) to hurl a pelota (ball) at high speed against a wall. The game once defined live sports in the city and earned a spot alongside cleavage and flamingos in the opening credits of Miami Vice in the 1980s. Jai-alai in Miami dates to the 1920s, and at one point the fronton was a popular spot for nightlife and entertainment.
But as tourists and locals turned away from jai-alai, operators throughout South Florida lobbied for the casino loophole as the only way to keep the tradition alive.
In his comments, Salazar said the June $180 million valuation of the fronton's parent company, Florida Gaming Corp., came as a surprise after owners and a New York-based investment fund, Silver Entertainment, agreed in late 2012 to a $130 million sales price, which included $15 million in obligations.
Florida Gaming, which earns most of its revenue from the Miami facility, was fending off a foreclosure fight by ABC Funding, the lender of the original $87 million needed to add the casino. Florida Gaming accused ABC of trying to use technical defaults to seize the profitable business.
The valuation brought new problems for Florida Gaming because ABC had a right to an additional $27 million bonus based on the company's appraised value. The bonus and penalties tied to the ABC loan meant Florida Gaming owners and stockholders would receive nothing after selling the company, which ABC claims is the real motivation behind the trip to bankruptcy court.
The owners "didn't like the deal they cut 10 months ago," said Drew Dillworth, a Stearns Weaver lawyer representing ABC. "They're using the lender as a cover" to stop the sale.
Florida Gaming claims ABC acted to prevent the sale, which helped prompt Monday's bankruptcy filing. Dillworth said ABC had expected the sale to close this week and was stunned when Florida Gaming instead filed for Chapter 11 protection.
Dillworth didn't object to Miami Jai-Alai's continuing to spend the more than $1 million needed each week to sustain the operation, or any of the other cash-flow needs of the casino. Linda Jackson, Salazar's partner at Jackson Salazar, said even a brief halt to the casino's access to cash would force it to stop paying out winnings and close its doors.
Mark approved a motion not to treat as creditors any holders of outstanding poker chips (estimated value: $10,000), and allow the casino to honor the chits without court permission. He also agreed not to segregate from a trustee's portfolio the rolling jackpot account the casino maintains.
"It's still going to go to someone lucky post-petition?" the judge asked as casino lawyers nodded.
Mark said he recalled when the fronton was a place for both fine dining and Miami's leading spot for live music. But he cut short Salazar's wistful introduction about the heady days for Miami Jai-Alai.
"Nice memories," the judge said, "aren't going to pay any debts."
(c)2013 The Miami Herald
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