Aladdin's $635M bankruptcy sale turned the Strip resort into Planet Hollywood

The Aladdin Resort & Casino opened in August 2000 on the Las Vegas Strip at a cost of $1.2 billion, but it was undercapitalized from the start and struggled even before the September 11 attacks crushed travel. On September 28, 2001 it filed for Chapter 11, with lenders providing $9 million in immediate operating capital.

After months of negotiations, Aladdin agreed in April 2003 to sell the property to a joint venture led by Planet Hollywood International co-founder Robert Earl, backed by Bay Harbour Management and Starwood Hotels. The $635 million deal included assuming $510 million of debt and liabilities plus $90 million of new investment.

Bankruptcy Judge Robert C. Jones approved the plan on August 28, 2003. Creditors were split into 13 classes and on average received 40 to 50 cents on the dollar, with wage and benefit claims paid in full and old equity interests getting nothing. A closing date of June 30, 2004 was discussed.

The buyer intended to convert the 2,567-room property into a motion-picture-themed Planet Hollywood hotel-casino, replacing the Arabian Nights theme that had failed to draw enough customers.

Sold out of Chapter 11 for $635M to a Planet Hollywood-led group that assumed $510M of debt and invested $90M, relaunching the resort under a global brand.

The resort's $1.2B construction cost was never matched by its revenue potential.

A brand-name operator offered both capital and a customer draw the property lacked.

Creditors accepted 40-50 cents on the dollar rather than face a long liquidation.

The deal kept the casino open, protecting jobs and gaming revenue during the sale.

For a distressed asset whose problem is too much debt, selling operations to a brand that brings customers can be the best exit; creditors settle for cents on the dollar and old equity takes nothing.

The sale closed in 2004 and the property operated under the Planet Hollywood name on the Strip, becoming a mainstay of Las Vegas Boulevard. For the lenders who financed the $1.2 billion resort, the case showed how quickly an undercapitalized mega-project can unravel, and for distressed owners it showed how a brand-led buyer can turn a failed concept into a going concern.