NEW YORK (Reuters) - The Las Vegas Monorail Co has filed for bankruptcy protection, marking the latest economic trouble to hit America’s busiest gambling center, and exposing bond insurer Ambac Financial Group Inc to a potential $1.16 billion of liabilities.
“The decline in the monorail’s operations is tied directly to the decrease in gaming revenues in Nevada, and particularly along the Las Vegas Strip,” Las Vegas Monorail Chief Executive Curtis Myles said in a court filing. Ridership “has not met projections formed prior to the economic collapse,” he added.
Las Vegas Monorail is a not-for-profit company set up by the state of Nevada which operates the driverless monorail, a 3.9 mile, seven-stop, elevated service connecting several hotels on the Las Vegas Strip and the city’s convention center.
The recession has reduced the number of visitors to Las Vegas’ casinos as well as convention attendance. The city has also suffered the collapse of a real estate boom.
According to a filing with the federal bankruptcy court in Las Vegas, Ambac Assurance Corp insured $451 million of tax-exempt bonds used to finance Las Vegas Monorail’s purchase of the rail line from MGM Grand-Bally’s Monorail LLC in 2000.
Ambac said if the company stops making payments on some senior “first tier” bonds, “total exposure under (Ambac’s) policy and surety will be approximately $1.16 billion.”
It asked the court to dismiss Las Vegas Monorail’s Chapter 11 petition and refile its case under Chapter 9, a part of the federal bankruptcy code that applies to municipalities.
Ambac and rivals have struggled to write new business since losing their “triple-A” credit ratings in 2008 in the wake of losses linked to risky debt and securitizations.
Last year, Ambac warned it could run out of cash and be forced to seek bankruptcy protection.
In his court filing, Myles said Las Vegas Monorail has since 2004, used proceeds from the initial financing and debt service reserves to keep operating, but has now depleted those resources.
He said that while revenue was sufficient to cover operations, it was never sufficient to service debt.
The monorail is expected to keep operating during the bankruptcy process.
According to its bankruptcy petition, Las Vegas Monorail has between $10 million and $50 million of assets, and between $500 million and $1 billion of debts.
The case is In re Las Vegas Monorail Co, U.S. Bankruptcy Court, District of Nevada, No. 10-10464.
Additional reporting by Jon Stempel; Editing by Andrew Hay
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