Las Vegas’ Lucky Dragon casino has filed for Chapter 11 bankruptcy protection just days ahead of a scheduled sale of the struggling Chinese-themed casino hotel in a foreclosure auction.
The resort filed for the protection, which would allow it to conduct the sale under the supervision of U.S. Bankruptcy Court, in order “to preserve jobs, pay its creditors and provide certainty to the market,” stated court papers filed on behalf of Lucky Dragon developer Andrew Fonfa.
Management said further it expects a “quick” but “thoughtful” sale and that the court oversight will offer “the best opportunity to preserve and maximize” the property’s value.
When it opened in December 2016, Lucky Dragon was the city’s first ground-up casino since the recession, but it struggled from the outset, hampered in part by its off-Strip location on Sahara Avenue and, as local reports have it, from its inability to compete with larger Strip resorts in offering levels of credit vital to attracting high-end Asian play.
Within months of opening, management began shuttering segments of the operation and laying off staff. The property’s lead building contractor claims it is owed millions of dollars for unpaid work, and then last September the unpaid balance of a $90 million loan issued to Fonfa went into default. Facing foreclosure, the casino and the remaining restaurants were closed in January. The nine-story hotel has been kept open.
Union Gaming analyst John DeCree said Lucky Dragon “caters to only one customer segment,” making it difficult to generate enough gambling revenue to cover its costs. He suggested a successful buyer “could try to broaden” its target market.
Samuel Schwartz, a bankruptcy attorney for the property, said San Francisco-based lender Snow Covered Capital, the source of the $90 million loan, agreed to delay the sale by two weeks to allow management time to develop a plan for getting Lucky Dragon’s finances in order.
The property also owes another $89.5 million to some 179 investors who provided financing under the U.S. government’s EB-5 visa program. Popular with Asians, and wealthy Chinese in particular, the program awards U.S. residency to foreigners who commit at least $500,000 to a U.S. business venture that will create at least 10 full-time jobs.
The resort currently employs around 98 people, according to a Las Vegas Review-Journal report.
