DALLAS - Houston-based Landry's Restaurants Inc. on Tuesday won a bidding war for thefailed Ocean Journey aquarium in Denver, nudging out Ripley Entertainment Inc. with a$13.6 million bid.
Ripley earlier had offered only $4.5 million for the aquarium but was forced to raiseits offer when Landry's entered the picture. Orlando, Fla.-based Ripley withdrew fromthe bidding after offering as much as $13.5 million, sources associated with thetransaction said.
The winning bid from Landry's means that after all expenses are paid, bondholders, whoown $56.8 million of defaulted tax-exempt revenue bonds issued to build the attraction,will receive about 35 cents on the dollar. The bondholders' recapture includes proceedsof the sale plus an $8.1 million debt service reserve fund.
"This obviously makes things better for the bondholder," said Steve Hoort, a partnerwith the Boston-based law firm Ropes & Gray, which is representing the bondholders.
Larry Fertitta, president and chief executive officer of Landry's, said the companywould convert Ocean Journey into its third Aquarium restaurant. The other Aquariums arelocated in Houston and Kemah, Tex. Landry's owns 280 restaurants around the country.
Fertitta said he targeted Ocean Journey as a purchase option after learning of Ripley'slow bid, adding that he would have paid as much as $16 million for the facility. He saidLandry's will invest up to $15 million to upgrade Ocean Journey, which will be renamedDowntown Aquarium in Denver. By next spring, the facility and its grounds will includeseveral seafood restaurants from Landry's multiple chains and amusement rides such as aFerris wheel, a carousel, and a mini-train.
The unrated bonds were originally sold in 1997 via the conduit issuer now known as theColorado Education and Cultural Facilities Authority, and paid the greater part of theapproximately $70 million cost of building and outfitting the aquarium.
The major bondholders are Putnam Investments, Delaware Investments, and RBC DainRauscher Inc., which served as the underwriter of the debt. Officials say there is alsoa significant number of retail investors.
The first technical default of Ocean Journey bonds came in 2001, when lower-than-expected attendance forced the aquarium to stop depositing money into a debt servicereserve fund. The aquarium missed its first debt service payment in early 2002 and filedfor Chapter 11 bankruptcy protection in April of last year, after attempts to convincethe city to take it over failed.
Since the aquarium's bankruptcy declaration, it has subsisted on attendance fees anddonations from the Denver community while Ocean Journey officials worked withbondholders to find a resolution to the debt default.
The bonds traded late last year for as little as six cents on the dollar for smallblocks to 35 cents on the dollar for a block of $2.25 million.
The sale to Landry's increases the bondholders' recovery by about 13 cents on the dollarover the amount they would have received if Ripley's original bid had been accepted.
"This is a classic example of picking up assets at well below replacement cost,' saidMark MacDonald, a partner in the Dallas law firm MacDonald & MacDonald, whichspecializes in bankruptcy and has represented bondholders and issuers in bankruptcycases.
