Saturday, Nov. 15, 2008

Hard Rock Park sets floor at $35 million

Theme attraction's future unsure as bids are invited

Got $3.5 million?

That's enough for a minimum down payment on the $400 million Hard Rock Park, which will go up for auction on Dec. 15, according to court documents filed this week.

The 55-acre park, which opened in April and closed in Chapter 11 bankruptcy in September, is looking to sell its assets - either in whole or part by part - and is accepting bids until Dec. 12.

Qualified bidders must show they can meet the minimum $35 million price, put up 10 percent of that as cash, and prove they have enough money and experience to run the business, according to court documents filed in Delaware bankruptcy court.

A spokesman for Hard Rock Park did not return requests for comment.

Whether any future owners will stick with the Hard Rock theme is still unclear.

The park licensed the brand name from the cafe company for at least $2.5 million a year, according to court documents filed by creditor Deutsche Bank Trust Company Americas. But Hard Rock International has not yet determined whether it will allow the agreement to be renewed if the park changes hands, court documents show.

The park's officials have said it will not open in 2009 if it does not find a buyer.

An auction is a fairly common route these days for bankrupt companies, said Elizabeth Gibson, a professor at the University of North Carolina at Chapel Hill.

"It's a way of assuring creditors that you put it out there and this was the best you could get for it, as opposed to some private deal with somebody," she said.

The park may want to make sure bidders have adequate "financial health and experience in managing" its assets for two reasons, said Michael Dickey, an assistant professor at the Charleston School of Law.

A business selling itself would want to make sure a bidder has enough money to go through with the sale - not just put down an initial payment and search for investors, tying up the process, Dickey said. Also, the business would want to make sure its creditors and other intellectual property holders, such as Hard Rock International, are comfortable with the bidder.

"If these people are owed money, they'll also have a chance to object to the approval of the sale, and may do so if it's a buyer with dodgy financials," he wrote in an e-mail.

The park stated in the documents that it has already heard from interested buyers, though it did not identify them. Also, it said it is actively seeking buyers.

Banks will be first in line to collect money from the park's sale.

Deutsche Bank, which pushed for the sale in court, is owed about $18.6 million. Next are the lenders who gave the park $2 million to finance its operations during bankruptcy. After that, administrative expenses and legal fees will be paid. Finally, any other "liens, claims and encumbrances" will be paid off with what's left.

Stockholders are probably out of luck, unless there will be money left over after the sale, which is unlikely, Dickey said.

"If that was the situation, it wouldn't make much sense for them to be in bankruptcy, particularly one involving a sell-off of all the assets," he said.

Also this week, the park withdrew its request to pay its top executives severance, though it may resubmit the request.

When the park off U.S. 501 opened its gates April 15, it boasted partnerships with bands such as Led Zeppelin and The Eagles. Local businesses hoped the theme park - hailed as the largest investment to date in South Carolina's tourism industry - would help catapult Myrtle Beach into the next strata of vacation destinations.

But the park failed to reach its target of 3 million visitors in its first year, and it filed for Chapter 11 bankruptcy protection in late September.

The park cited "macroeconomic conditions that significantly depressed overall demand in the travel and leisure industry" and a lack of cash to advertise.

Yet theme park experts, locals and visitors criticized the park's ticket price - $50 per person, plus a parking fee - as part of why it did not take.

Judge Kevin Carey, who is presiding over the case, is scheduled to rule on the request for the auction Thursday, and objections to the auctions are due to the court Wednesday.