Icahn backs off Arizona Charlie's takeover bid

Bruce Becker appears likely to retain control of Arizona Charlie's, the casino he founded and named for a legendary ancestor, after reaching an agreement with billionaire Carl Icahn.

Becker and Icahn said Wednesday they had agreed to settle their acrimonious fight for control of the Decatur Boulevard property. If approved, the agreement will leave Becker in control of Arizona Charlie's and give Icahn and other owners of the bankrupt resort's mortgage debt handsome returns on their investments.

The agreement came just one day before U.S. Bankruptcy Court Judge Linda B. Riegle was scheduled to begin the process of deciding which of three competing Arizona Charlie's reorganization plans would be put into effect.

The author of the third reorganization plan -- Station Casinos Inc. -- appears to have been caught by surprise by the agreement. A Station attorney said the company has not yet decided whether it will support the Becker/Icahn settlement.

Becker has been battling Icahn and Station for control of Arizona Charlie's since the resort declared bankruptcy last November. Icahn bought a majority of the resort's $55 million first-mortgage debt notes last summer. Station owns a minority interest in the notes.

Arizona Charlie's is owned by Becker Gaming Corp., which also owns a number of Arizona Charlie's bars around Las Vegas. Arizona Charlie's, with 258 rooms and 940 employees, caters primarily to locals. It filed for bankruptcy after a Missouri riverboat deal went sour.

Under the agreement announced Wednesday in U.S. Bankruptcy Court, holders of notes on Arizona Charlie's first mortgage will receive a pro-rated share of $61.6 million, a $6.6 million premium on the notes' original face value.

While Icahn has not disclosed exactly what he paid for the 51 percent of Arizona Charlie's debt notes, the face value of those notes is $28 million. Under the settlement, Icahn will receive $31.6 million in return for the notes.

In return for payment, all noteholders will give up their claims on Arizona Charlie's.

The payment is the end result of a months-long bidding war. Becker's initial proposal would have paid mortgage-note creditors $44 million to $45 million. Becker will finance the payment with a loan from United Healthcare Financial Services of Santa Monica.

But the settlement is far from a done deal.

Station is seen as a wild card at this point. The locals casino company could fight the settlement or try to make creditors a better offer. Station's latest offer -- $61 million -- is only slightly below that of the Becker/Icahn settlement.

Station officials, who have declined comment on Arizona Charlie's throughout the bankruptcy process, again declined comment on the settlement.

Icahn has not completely abandoned his claim to Arizona Charlie's. If Becker's financing falls through or is delayed beyond July 31, Icahn's High River LP would take control of the resort with a payment to note-holders valuing the debt at $52 million.

"It's a no-default kind of deal," Icahn attorney Ed Weisfelner said. "Either he pays us ... or he doesn't."

Becker said his financing is assured.

"We're 99.9 percent sure it's in place," Becker said. "This gets Mr. Icahn's vote."

Under Chapter 11 bankruptcy court rules, creditors of a bankrupt company vote on whether to approve reorganization plans submitted by various parties. Generally, the bankrupt company gets first crack at submitting a reorganization plan; if its plan is rejected, other parties are allowed to submit competing plans for approval.

In the Arizona Charlie's case, Riegle decided in April to let plans submitted by Becker, Icahn and Station go to creditors on a single ballot, reasoning that creditors could make an informed decision only by comparing the plans side-by-side.

The plans were sent to creditors in mid-May and were due back in bankruptcy court today.

Because Icahn owns a majority interest in the resort's mortgage debt, he has significant influence over the vote. But other types of creditors, including vendors who supply Arizona Charlie's with everything from food to slot machines, have said they would vote for the Becker plan.

According to attorneys for Becker Gaming and Icahn, most creditors have voted in favor of either the Becker or Icahn plans. Officials declined to disclose exactly which creditors voted for which plans.

Even if the Icahn or Station plan won the vote, Riegle could still award Becker control of Arizona Charlie's under a rare procedure known as cram-down. Riegle has said she would consider factors such as Icahn's current lack of a gaming license and future plans for the resort when deciding which plan to approve.

Confirmation hearings to decide which plan would be implemented were to begin today. Those hearings have been delayed until Wednesday and now will probably be far less contentious than once expected. Riegle said she mainly wants to see evidence that Becker's financing is in place.

Votes for either the Icahn or Station plan will be presumed to be votes for the settlement, officials said.

Again, Station is the unknown factor. If Station withdraws its Arizona Charlie's bid, the settlement probably will be quickly approved.

The agreement contains a number of provisions that address concerns both Becker and Icahn had raised about each other's plans. In the event Becker fails to meet the July 31 financing deadline, his family would be required to either transfer control of the land on which Arizona Charlie's and its parking lot sits to Icahn, or to extend the leases for that land for 10 years. Becker's family, which owns the land, had threatened to withhold the land and parking- lot leases if Icahn took over the resort.

The plan also calls for Becker to continue operating the resort for 60 days in the event Icahn takes over. This would presumably give Icahn time to complete the approval process for a gaming license. Becker had charged that Icahn, if approved as owner, would have to shut Arizona Charlie's down while pursuing his gaming license.

Icahn has applied for a gaming license in connection with his recent takeover of the Stratosphere Hotel and Casino.

The scene in Wednesday's court hearing was rather odd as attorneys -- who had sparred verbally and in court filings for months -- joked around as if they were old friends.

"Quite frankly, we're here now as a cheering group for Mr. Clemency," Weisfelner said. John Clemency is Becker's lead litigation attorney in the case.

After the hearing, Weisfelner said he saw no discrepancy between Icahn's desire to take over and run Arizona Charlie's -- expressed in a May Sun interview -- and his decision to accept a settlement.

"I think what we had on the table was a fair proposition," he said.

Frank Merola, another Becker attorney, said the settlement was the best possible conclusion for Becker.

"The (agreement) means, to a certainty, the Becker family keeps control," Merola said.

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