MANHATTAN (CN) – Casinos across the United States are accused of siphoning off $150 million from a $960 million loan, making their companies insolvent. Five Mile Capital sued RIH Casino Resorts, Resorts International Holdings and affiliates in New York County Court.
On Oct. 26, 2006, the casinos borrowed $960 million from J.P. Morgan Chase Bank N.A. to “repay existing loans on the properties,” according to the complaint.
The complaint continues: “Recognizing that they would not be able to comply with their obligations under the various agreements, in February 2008, the borrowers improperly transferred more than $150 million through RIH LLC to an RIH LLC affiliate, RIH Casino Resorts LLC (‘RIH Casino’). This transfer left the borrower defendants woefully undercapitalized and unable to meet their oblations as they became dues, including those obligations under the loan.
“Not surprisingly, the borrower defendants thereafter defaulted on the loan, failing to make interest payments as they became due and failing to repay the outstanding principal.
“Plaintiff brings this action to set aside the improper transfers and to recover the damages caused by the defendants’ conduct.”
The transfer left the companies “without sufficient capital to fund operational shortfalls and make necessary improvements,” making them insolvent, the complaint states.
Named as defendants are RIH Casino Resorts, LLC and RIH LLC (operating out of Los Angeles); RIH Acquisitions IN, LLC and RIH Propco IN, LLC (of East Chicago); RIH Acquisitions MS I, LLC, RIH Propco MS I, LLC, RIH Acquisitions MS II, LLC and RIH Propco MS II, LLC (of Robinsonville, Miss.); and RIH Acquisitions NJ, LLC and RIH Propco NJ, LLC (of Atlantic City, N.J.).
Lead plaintiff Five Mile Capital SPE B LLC, filing for itself and Berkadia Commercial Mortgage LLC, says the $150 million transfer caused the casinos to default on an interest payment on July 9, 2009.
Five Mile Capital seeks an accounting and damages for fraudulent transfer.
It is represented by Louis Solomon with Haynes and Boone.