Press Room

Sale deals Edgewater Casino a new hand

August 30, 2006
Canadian Press Wire

VANCOUVER - A B.C. Supreme Court judge has approved a deal to sell the Edgewater Casino to a company based in Las Vegas, which should ensure the continued operation of the downtown-Vancouver establishment.

Edgewater Casino Inc. had been in bankruptcy protection since May, as a result of $29-million in debts it incurred since it opened in February, 2005, at its Plaza of Nations location.

The $42-million deal approved yesterday by Mr. Justice Grant Burnyeat calls for the new owners, Paragon Gaming Inc., to make a full payout to the creditors of the casino.

Companies controlled by the current owners, Leonard Libin and Gary Jackson, will also receive an undisclosed sum, after creditors and legal fees are paid.

The largest creditor is Greg Kerfoot, owner of the Vancouver Whitecaps soccer club. He lent Edgewater $12-million and also provided a $5.4-million letter of credit for money owed to the British Columbia Lottery Corp.

"We are pleased the deal is done," said John Sandrelli, a lawyer retained by Edgewater to navigate the company through the bankruptcy protection process.
He said that is very unusual for creditors to be paid in full after a bankruptcy protection proceeding.

"The future of the casino looks promising. It has a clean balance sheet," said Mr. Sandrelli, who suggested that Paragon has enough resources to ensure the long-term success of the casino, which employs more than 500 people.

Paragon is a privately held company that operates casinos in the western United States and is developing two projects in Alberta.
The deal must still be approved by the B.C. government, but Yale Rowe, vice-president of operations for Paragon, said he is hopeful the sale will be finalized by the end of this week. "We have had great communications with the BCLC," Mr. Rowe said.

There are no plans to lay off employees and Mr. Rowe said Paragon is committed to the existing site at the Plaza of Nations.

"This is not rocket science," said Mr. Rowe, who explained that Paragon has identified ways to improve the financial performance of the casino.

The new owners must overcome the continuing challenges at Edgewater, which has lost money ever since it opened 18 months ago, behind schedule and $4-million over budget.

The casino has been losing $157,000 a week, according to court documents filed by Edgewater as part of the bankruptcy-protection proceeding. Parking problems, poor signage and an inability to reduce staff because of the terms of the collective agreement are all cited as reasons for the poor financial performance.

While the casino has struggled, the provincial lottery corporation has received more than $60-million in revenue from Edgewater since it opened, the court documents state.

The BCLC receives 75 per cent of slot and electronic table games profits, 60 per cent of standard table games and 25 per cent from poker and craps, in its operating agreement with Edgewater.

The deal with Paragon is the third that Mr. Libin and Mr. Jackson have attempted.

A tentative agreement with Great Canadian Gaming Corp., which owns the River Rock Casino Resort in Richmond, fell through last fall.

When the BCLC was asked to provide some interim financial assistance after the deal collapsed, it declined, Edgewater says in the court documents. There was also a possible deal with Mr. Kerfoot, but the documents say that transaction did not go ahead because of a disagreement with the provincial Gaming Policy and Enforcement Branch.

Paragon is bound by the terms of the existing operating agreement in the short term, although it is expected to enter into talks with the BCLC to sign a new agreement.

BCLC spokeswoman Shelley Marsh said she could not comment about any possible changes to the operating agreement. "We look forward to working with Paragon," she said.