I've read the 8k. Here is my analysis
Actually all I read was "Item 9 - Other events" which is essentially a summary of the deal and situation. The full contracts, reproduced below Item 9, contain the details. There could be some key elements in the contracts not mentioned in the summary.
CAFE was not the "Restaurant Operator" but owned a majority stake in the Operator. In other words, a corporation separate from CAFE -actually a LLC was set up to own and run the place. A slick move if trouble arises. NevStar had a piece of the operator and was the Landlord. This is often done for construction allowances with landlords.
Technically, the restaurant operator, not CAFE owed 200k in back rent. NevStar served notice to terminate the lease. CAFE places the restaurant operator into bankruptcy, essentially freezing everything and boxing NevStar in.
With that leverage CAFE used the cash it owed NevStar to buy out the minority partners in the Restaurant Operator, with the exception of NevStar. CAFE then sold all interest in Operator to a Mirage affiliate RVNI. Prior to all this RVNI was in negotiation to purchase NevStar. Nevstar wanted its rent money from CAFE, but CAFE, obviously aware of the RVNI situation, decided to hose Nevstar, and it all worked. An over simplified explanation but should be clear.
Now RVNI (part of Mirage) is the landlord. All arrears (past due rent) are waived by RVNI. CAFE got a sweetheart deal (though temporary) on the rent, that being 1/2 of the positive cash flow from operations. This is a huge concession. Restaurants three primary cost are, food, labor and rent. Rent usually being a fixed $ amount per square foot. This is where most mom-and-pops go wrong, paying too much in rent. Having a primary cost reduced to 1/2 of free cash is quite a sweetheart deal. The Company, Mirage and the Restaurant Operator agreed to seek jointly the dismissal of the Restaurant Operator's bankruptcy proceeding. This indicates possible collusion between CAFE and Mirage from the beginning.
As for Mirage's motivation to buy out Nevstar, clearly it is property related . As for their interest in CAFE, one has to assume from the part of the deal involving CAFE that there is an interest on the part of Mirage to see that the restaurant continues to operate, at least for now. Don't know enough about the property to know if Mirage wants to build something where the restaurant is now?
In any event, all this puts the Las Vegas operation (at least for now) in a much stronger financial position as it was prior. |
