(Updates with priority of future debt in ninth paragraph.)
June 15 (Bloomberg) -- Las Vegas Monorail Co., the bankrupt nonprofit company that proposed paying bondholders about 9 percent of the $500 million they are owed, said it must expand or shut down within eight years.
The company will return to bankruptcy court in Las Vegas next week to seek permission to send its reorganization plan to creditors for a vote. That plan would cancel $207.3 million in bonds without any repayment and replace $500 million in higher- ranking debt with $44.5 million in new debt.
By 2019 the company must be in position to get grants, or new loans of about $12 million, to build two new stations “so that the monorail does not cease to operate sometime in the next 8 years,” it said in court papers filed June 6.
The 3.9-mile (6.3-kilometer) driverless transportation system runs from near the Las Vegas Strip to the convention center and carries passengers between gambling resorts.
A group of bondholders has been battling the company in court since last year, when the creditors sought to strip the monorail’s managers of the exclusive right to reorganize the system.
The bondholders said this month that they are preparing their own reorganization plan that would compete for the approval of U.S. Bankruptcy Judge Bruce A. Markell. Markell must approve any plan after taking the votes of creditors into account.
Trying to Settle
The two sides are still trying to settle their differences before the next court hearing, scheduled for June 20, Susan Freeman, an attorney for bond trustee Wells Fargo Bank NA, said in an interview.
Bondholders owed at least $375 million and San Francisco- based Wells Fargo said last year that they want a plan that would give them control of any revenue the system collects beyond what is needed for operations and maintenance. That demand may conflict with the monorail’s proposed plan.
Under that plan, the company would have the right to borrow as much as $12 million to construct two new stations along the existing line. That debt would be guaranteed with a pledge of 100 percent of the additional ticket sales generated by the expansion and a lien on the two stations.
The bondholders own at least 75 percent of $500 million in bonds Las Vegas Monorail issued to buy the system, court papers show.
In their reorganization plan, Las Vegas Monorail’s managers proposed giving those bondholders three new notes worth $44.5 million that mature in 2019, according to court papers.
Gerald M. Gordon, an attorney for Las Vegas Monorail, didn’t immediately return a call for comment.
Ambac Assurance Corp. insured at least $451 million in tax- exempt bonds issued in 2000 by the Nevada Department of Business and Industry that were backed by a pledge of revenue from the monorail, according to court papers.
After Las Vegas Monorail filed for bankruptcy in January, Ambac said the case might cost the New York-based bond insurer almost $1.2 billion. Ambac’s holding company, Ambac Financial Group Inc., filed for bankruptcy in November in Manhattan.
Las Vegas Monorail said in its bankruptcy petition that its assets were $10 million to $50 million.
The case is In re Las Vegas Monorail, 10-10464, U.S. Bankruptcy Court, District of Nevada (Las Vegas).
--Editors: Andrew Dunn, Glenn Holdcraft
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