Thursday, November 2, 2006

Trustee Has One Bid To Start QSDI's Sale

By Harry Saltzgaver,
Executive Editor

The good news, according to Howard Ehrenberg, bankruptcy trustee in the Queen’s Seaport Development, Inc., bankruptcy, is that one qualified bidder has begun the process to buy the lease to the Queen Mary and the surrounding 55 acres.

The bad news, also according to Ehrenberg, is that process won’t be complete until next spring. That means the bankruptcy will be more than two years old before it is settled.

“We have received the first written proposal,” Ehrenberg said. “I would expect two or three more in the next month or so. But the good news is we have a bidder that I believe has the financial ability as well as the experience to take over and successfully operate the lease.”

The city of Long Beach owns the Queen Mary and the 55 acres around the historic ship. QSDI holds a 66-year lease and the development rights for the property. Led by Joseph Prevratil, QSDI and the nonprofit operator of the ship, the RMS Foundation, had apparently rebounded from the tourism plunge after the Sept. 11, 2001, terrorist attacks.

However, QSDI and the city became embroiled in a dispute in 2004 over the way rent credits were taken beginning in 2001. When negotiations failed, the city issued a notice of default and Prevratil responded by filing for Chapter 11 bankruptcy protection. (The RMS Foundation, which operates the ship, never entered bankruptcy.

U.S. Bankruptcy Court Judge Anthony Zurzolo appointed Ehrenberg as trustee for the operation in April this year. He has since settled lawsuits filed by Sempra Energy and an elevator repair and maintenance firm filed against QSDI. Two other suits, one by minority investors collectively called Bandero Inc. and the other by the city for the disputed rent credits, remain unresolved.

“I’m in negotiations with the city in regards to the rent dispute,” Ehrenberg said. “I won’t say we’re close, but I am cautiously optimistic that we can get a settlement in place. If not, we’ll continue to prepare for the lawsuit and move forward with the bankruptcy resolution.

“The Bandero case is still moving forward. We’re hoping to go to the judge soon to seek a ruling that, even if it eventually is ruled that Bandero might be due some damages, it wouldn’t tie up transfer of the lease.”

While Ehrenberg has control over QSDI operations as trustee, he only has oversight of the RMS Foundation. Ship operations remain under Prevratil.

“I continue to have my forensic accountants looking at the operations and the inter-corporation transfers,” Ehrenberg said. “I would report it if there was something amiss, and we have seen nothing to report.”

That could at least partially be due to the Queen Mary having a good year. Prevratil said the ship’s recent Halloween promotion, “Shipwreck,” was up 7% to 8% over last year, and the ship itself is doing well.

“The holiday bookings look good,” Prevratil said. “People are spending money. It has been a good year, and barring some sort of catastrophe, I think it will continue.”

Another plus has been an increase in special events in and around the ship. A super motocross is expected to draw crowds this weekend (see story, Page 1B), and “Cavalia,” a popular horse/acrobat show created by one of Cirque de Soleil’s founders, is negotiating for a six-week run early in 2007, Prevratil said.

“We got our permanent entertainment license, too,” Ehrenberg said. “That’s big. We still have to get permits for specific events, but it identifies us as an entertainment area.”

Ehrenberg said the current bidder, which he declined to name, has asked for 120 days to do its due diligence once the offer is accepted. That due diligence includes talks with the city to gauge officials’ willingness to change the portions of the lease that led to the rent credit dispute in the first place, he added.

“Once that’s done, we can take an offer to the court,” Ehrenberg said. “That’s where any overbidding would take place if there is any.”