Bankruptcy Judge Bruce Markell in Las Vegas on Friday rejected the Las Vegas Monorail’s latest plan to emerge from bankruptcy, saying its own numbers show it would be encumbered with twice as much debt as the Monorail is worth.
The ruling will likely cause the Monorail, its attorneys and its creditors to work on amendments or a new plan to submit to Markell in the coming months.
The ruling came as no surprise after a hearing Monday in which Markell expressed doubts about the plan.
The plan called for the Monorail — estimated to be worth $16 million to $20 million — to be encumbered by debt of $44.5 million. Bondholders stood to lose hundreds of millions of dollars but supported the plan anyway, as the $44.5 million the Monorail would owe them is more than they would receive in a liquidation.
“Its current plan dooms it to failure, if not in the next few years, certainly by 2019,” Markell wrote in his order
Markell wrote in an order that Monorail officials hadn’t shown with their financial projections that the system wouldn’t end up again in another restructuring.
Monorail CEO Curtis Myles III and a Monorail financial analyst testified at the hearing that there are several upsides to help the Monorail deal with a projected shortfall of $38.4 million by 2019.
These include Project Linq, under development behind the Flamingo, and the possible reopening of the Sahara; both would boost ridership. The Monorail also hopes to become a government entity or gain government sponsorship to obtain federal grants.
Markell said in his order these scenarios aren’t concrete enough to ensure the Monorail won’t fail again.
“The fact that all three of these contingencies must occur before the shortfall is completely met further highlights the improbable chain of events necessary to yield a scenario in which all reorganization debt will be paid when due,” Markell wrote in his order.
“Although the upside scenarios have some appeal, each of them is subject to significant contingencies outside of LVMC’s (the Monorail’s) control. LVMC cannot control, for example, when or if the Sahara hotel will reopen, or the timing of the anticipated Project Linq tourist attraction, or whether the attraction will act as a fare magnet. Even the suggestion that more grants and subsidies are in the offing is subject to either new state legislation, or the sponsorship of some as yet unidentified state or municipal agency,” the judge wrote in his order.