Appendix A
Out-of-Court Settlement Once your company is reached the point at which your major lenders, to whom you send regular financial reports, and certain suppliers are already concerned about your financial situation. Therefore, it is usually wise to work with your CFO and CTP, Certified Turnaround Professional, to create a written recommendation for an out-of-court settlement focused only on your major creditors.It should be structured similar to a Chapter 11 Plan of Reorganization. Similarly situated creditor categories should be treated on generally equal terms. Otherwise, they would be unlikely to agree. You don’t necessarily indicate or threaten Chapter 11. Your plan is to avoid a Chapter 11.Once it is written and appears realistic, schedule an in-person meeting with your primary creditors—one at a time. You should present your written plan at that meeting. It should be either you or your CFO, along with your CTP, to indicate that you have engaged professional guidance and your sincerity.These major creditors probably already understand your financial situation, and have serious concerns, and welcome the fact and that you and your professionals have developed a specific, realistic plan. As a result, they are more likely to work with you toward its possible success rather than simply becoming defensive and negotiating harder. They will see that you are attempting to avoid significant damage to your company and its creditors, and will likely take you proposal seriously.Your plan must be designed to treat all similar major creditors the same. Without their believing that, they will not likely agree to your plan. It is important that they read you as being truthful and sincere. They also will not likely agree at the first meeting. They will “think about it.” And they will likely call with questions or want to meet again.You probably will have many more unsecured trade creditors than larger secured lenders. They can be packaged into groups and, once they see your overall plan, will hopefully agree to at least accept a long-term more affordable payment plan, assuming that your cash flow projections show what could be possible. This would enable them to retain you as a customer.It is advisable to begin this process well in advance of seeking a bankruptcy attorney until you have a good “feel” whether or not the major lenders or trade creditors are likely to agree. If unable, move to considering a pre-pak. If too late or unable, then the next step is a well-prepared Chapter 11. When considering these options, an attorney should be engaged as needed.
Appendix B
The Pre-packaged Chapter 11 Bankruptcy A regular Chapter 11 is initiated upon your lawyer’s filing of the bankruptcy petition. Then all creditors are immediately notified of the filing. The most critical ingredient in a successful development of a Chapter 11 in the “pre-pak” format is having only a few major lenders with which to deal prior to actual filing the Chapter 11. First, the debtor must design the major Plan of Reorganization creditor payment terms, to which major secured and significant large unsecured creditors must agree and sign immediately before the bankruptcy filing. That condition is critical to the shortened duration. Typical terms might be extending the loan’s terms, or interest rate, or other conditions—or, sometimes, no conditions. This is designed to encourage these lenders to accept those pre-pak terms in place of a regular longer-term and considerably more expensive traditional Chapter 11. That way, there might be only one, two, or three new payment agreements to be completed prior to filing. Once the pre-pak is filed, most of the remaining unsecured creditors will probably agree to reasonable restructuring terms. In dealing with the secured creditors up-front, it is important to be (and to have been) straightforward and open with them in your discussions about the company’s challenges and how this pre-pak would benefit them relative to their current situations. Ability to cancel unprofitable leases, and other contracts Fortunately, there are sometimes other valuable of the benefits Chapter 11, which offer the debtor even greater benefits—the rights to cancel executory contracts, which can be generally defined as leases, franchise agreements, installment credit loans, mortgages, consulting and service contracts, etc. These can generally be cancelled immediately at the debtor’s option. In some examples, such as long-term unprofitable real estate leases, there might be some formularized resulting costs, but usually well worth that cost. The debtor has these rights, whether it is the tenant or the landlord. A simple example of an ideal situation for a pre-pak A sporting goods company, ABC, has 100 stores across the U.S. on leased commercial property. New competitive stores have since entered the market, resulting in 30% of its locations becoming unprofitable. Closing those stores and canceling those long-term leases would immediately return ABC to substantial profitability. The major secured creditors would have to agree pre-filing. The unsecured creditors would likely accept very reasonable, affordable, and longer terms after filing. Those landlords, whose leases would be cancelled, would not have to be notified until post-filing of the bankruptcy. See the Piccadilly Cafeteria case: “Piccadilly Spectacular Turnaround / Disaster”, at the Liuzza.net website. Liuzza Managemeent Consulting, LMC, created the basics of the pre-pak. LMC’s legal cost estimate, for including both pre and post filing cost estimate was $500,000. The company’s law firm, a principal of which was a former Chapter 11 bankruptcy judge, agreed to the fee. However, for some unstated reason, the debtor’s private equity owner chose to wait one year and then chose a larger local law firm, which filed a regular Chapter 11 which consumed over two years. But worse, the owner lost all its equity! The major unsecured creditor received the total ownership of the company in settlement of its loan.
Appendix C
DIP (Debtor-In-Possession) Loans DIP loans should be considered and negotiated well before filing.
Appendix D
The Critical Path Process The primary and necessary control tool you can have to protect your company against The Club or even non-Club attorneys, is a Critical Path Meeting regimen: a. A periodic Critical Path meeting between your head lawyer and you, and possibly your CFO, must occur on a regular pre-set basis, at least monthly. This Critical Path approach needs to be established and confirmed upon interviewing even the first prospective Chapter 11 attorney. That attorney’s refusal to agree up front to these regular meetings is a strong indication that he, unfortunately, is a member of The Club. Your first such meeting would occur after the attorney is officially hired. b. By definition, the Critical Path Key Items (KIs-1, 2, 3, etc.) must be done in succession. The next one cannot be begun until the completion of its prior item. The major KIs must be listed on a single timeline, and then secondary items can be listed and done concurrently with additional parallel timelines on your chart. c. Improper management of these two different timelines can result in higher fees and/or reduced effectiveness and communication. d. These regular updates on the law firm’s legal fees and expenses will maintain pressure on the law firm and avoid surprises to you and your company. e. These discussions should include the business impact of many legal decisions and deals the attorney has or will have to make that often have a direct impact on your business. f. Without your having been advised in advance on these decisions, you will not have been aware of possible alternatives or challenges you can express. g. Ongoing discussions, looking backward and forward, will continuously educate him about you, your decisions, and your beliefs, and vice versa. It will also help determine what information to share with others and what to keep private.h. Following this format in managing your case will minimize the chances that the attorney will succumb to conflicts of interest temptations. i. Assign probabilities of successful achievements to each major Critical Path item. j. Whether leases or other executory contracts should be cancelled. k. Proper understanding and use of the Automatic Stay, which “stays” all creditors from taking any action to enforce any activities to collect on “pre-petition debt”—even a phone call! l. If the attorney realizes that an important Critical Path deadline might be missed, the attorney must call you that day—no texts or emails—so that you may respond or discuss immediately. m. If your prospective or actual attorney turns out to be a Club member, that attorney is likely to resist this Critical Path degree of communication and accountability. Therefore, you must insist on it. Should he not agree, consider finding an alternative law firm. n. Conflicts of interest i. A regular item should be to inquire whether your attorney currently sees any conflicts of interest and whether one or more are expected in the future. ii. You want to keep this sensitive topic on your lawyers’ minds regularly. o. Later, items to be discussed i. Feasibility requirement, and ii. Plan of Reorganization
Appendix E
Guidance on Selecting and NOT Selecting Bankruptcy Lawyers, v23 (This is the author’s opinion, and is intended to cover the two extremes and provide a framework within which most bankruptcy law firms fall.) Creditor-oriented vs. Debtor-oriented Bankruptcy Law Firms Big picture on the primary elements of Chapter 11 bankruptcyWhen a company, the ”Debtor,” files for Chapter 11 bankruptcy, its law firm immediately files numerous necessary documents, setting up the bankruptcy process, which usually includes allowing the debtor to be still controlled by its existing management, hence Debtor-in-Possession or “DIP.”The next fundamental goal of Chapter 11 is that the debtor commence designing and negotiating with its creditors a Plan of Reorganization, which must be accepted by a significant number of creditors and approved by the court to confirm the Plan. By doing so, the debtor can successfully exit Chapter 11 with a newly restructured company.If such a Plan cannot be agreed upon by the appropriate creditors and approved by the court, the court will likely order the sale of the company and/or its assets pursuant to specific court directions or through a Chapter 7 trustee sale. Additionally, the court could appoint a Chapter 11 trustee to assume control of the entire DIP and either pursue a Plan of Reorganization or liquidate it. Creditor-oriented bankruptcy firms:The goal of Chapter 11 attorneys for the debtor should be to create and gain acceptance of a Plan of Reorganization at the lowest possible appropriate cost to the debtor. Yes, there are significant legal issues that must be addressed. However, achieving agreement on a Plan of Reorganization eventually becomes more of a negotiation (sometimes even creative) process, not simply a legal process. In other words, to cease primarily arguing the law and focus mainly on making deals with creditors before the debtor is about to go “off its financial cliff,” to the detriment of all parties involved.Used here, a “creditor-oriented” law firm is one that, in Chapter 11 cases, generally specializes more in representing its already-existing clients for collecting accounts receivable or defaulted loans from a debtor that had already filed Chapter 11. Not included in this category are firms representing claimants in suits for damages caused by the debtor. An extreme example is when these creditor-oriented firms represent the debtor side in Chapter 11, these clients are sometimes internally referred to as “throw-away” clients that might not survive, even if a Plan of Reorganization is completed.Creditor-oriented law firms representing DIPs typically file motions and continue to argue new versions of these legal issues in open court, leading to increased legal fees due to an additional series of motions and responses, and to multiple payments to the same debtor and creditor lawyers for the same issue. Sometimes in other businesses, this is called “churning the account.”When representing the debtor, these creditor-oriented law firms often lack the motivation to be efficient or effective in serving the debtor’s interests. For example, they frequently are accused of returning these clients’ calls and messages last. They typically continue this process, earning more fees, until they reach the debtor’s “wall,” meaning the client is almost out of financial resources to fund the Chapter 11 case further. At this point, the creditor-focused firms shift their attention to reaching agreements with creditors, hoping that it’s not too late to obtain approval of a Plan acceptable to the debtor. If not, the judge is likely to dismiss the case and either convert it to a Chapter 7 liquidation or assign it to an independent Chapter 11 trustee from outside.When representing creditors, the creditor collection side of the bankruptcy function is mostly repetitious, mechanical, “left-brain,” easy fee-generating work.When these same creditor-oriented firms represent debtors in Chapter 11, their financial incentive is to staff their bankruptcy departments with the least qualified lawyers, leaving their sharpest lawyers to focus on solving other long-term creditor-client problems to retain their business.They rarely provide their debtor clients with a “game plan” to expedite plan approval, a legal fee budget, or a “critical path” with accountable timelines for success.Providing prompt and attentive service to their “throw-away” clients is rarely a top priority.Potential conflicts of interest are usually reviewed and/or disclosed to clients before the execution of engagement agreements. The increasing length of many Chapter 11 cases often gives rise to new conflicts of interest within and outside the case. These are usually difficult to identify and neutralize well into the case, and can grow into significant problems for both sides with detrimental repercussions. Debtor-oriented bankruptcy firms:When representing the DIP in Chapter 11, their primary focus is generally on finding solutions quickly rather than risking the liquidation and loss of the client.They acquire their new Chapter 11 clients primarily by referral. As a result, establishing a reputation for successfully achieving economic Plans of Reorganization is crucial for their new business development.Their mindset is more likely to be focused on quickly finding solutions to the problems that the client and its executives, CPAs, and lawyers were unable to solve.In Chapter 11 cases, clients often reach a point at which they have exhausted all available resources and expertise to avoid embarrassment, costs, and customer losses before filing. They have hit their “wall” already.Therefore, the debtor’s attorneys must be motivated, skilled, and experienced in quickly and urgently finding previously “impossible” solutions to earn a winning reputation.At that point, their immediate focus must be on saving the client from liquidation or failure.They must have already connected with their clients, learned more about them, brainstormed with them, found alternatives to present to creditors, and sometimes take appropriate risks.If there is no success there, use the bankruptcy laws and rules creatively to mitigate the damage.They have no choice but to promptly apply their best brains and group thinking to find such alternatives.Therefore, primarily creative (right-brained) collective thinking and personnel must be applied to these challenges to outsmart their (left-brained) linear-thinking opposing lawyers.They, like their debtor clients, must also be in “crisis” mode.Promptness in client service is essential for quicker client decisions and feedback on the lawyer’s ideas
Piccadilly Food Cost Succcess
This engagement with Piccadilly Cafeterias, a $160,000,000 company, was completed in October 2013. In April 2010, Piccadilly engaged Liuzza to initiate and lead a comprehensive food cost reduction program. In addition to the program’s design and its components, Liuzza worked closely with all levels of management to remove organizational impediments that inhibited the full development and success of the program. By the end of the third year, cumulative savings totaled $4,305,000 and were at a running rate of over $2,000,000 annually. See below the Executive Summary, presented with permission, of a detailed report prepared for creditors. Piccadilly Restaurants, LLC Report on food Cost Savings / Cost Avoidance Initiative Executive Summary In April 2010, Piccadilly’s food cost was 29.4% of sales. Food cost per guest was $2.30, and the company’s cost of wholesale food ingredients averaged $0.95 per pound. Executive management believed the company had a significant opportunity to reduce food costs by 1% to 2% of sales—$1.0 to $2.0 million annually. Senior management then embarked on a comprehensive and determined initiative to achieve or exceed this goal. This report outlines the steps taken and the corporate impact of this endeavor. April 2010 Food Cost as % of Sales -29.4%$ Food Cost per Guest – $2.30Lbs. Used per Guest – 2.43 June 2013 Food Cost as % of Sales – 27.5%$ Food Cost per Guest – $2.47Lbs. Used per Guest – 2.13 Had this program not occurred and its numerous components not implemented, then by June of 2013, commodity price inflation would have driven these costs to: Food Cost as % of Sales – 33.58%$ Food Cost per Guest – $2.64 For each twelve-month period since its beginning in May of 2010, the program has saved or avoided costs of $883,000 from May 2010 through April 2011, $1,291,000 from May 2011 through April 2012, and $1,541,000 for May 2012 through April 2013. And for May and June of 2013, the amount is $590,000. The total estimated cost saved or avoided from May 2010 through June 2013 is $4,305,000. There are additional food cost programs to be implemented as the company enters Phase III of the Initiative.
Piccadilly Spectacular Turnaround / Disaster
In 2009, Piccadilly Cafeterias, the nation’s largest cafeteria chain with over 100 units, owned by a large California private equity firm (pseudo-name: AAA), was floundering. The Chief Financial Officer (CFO) engaged Liuzza Management Consulting (LMC) to attempt to negotiate settlements with several landlords in three states on closed or underperforming restaurants. LMC achieved those objectives within three months. In 2011 LMC was then asked to advise and help implement food cost reductions across the system of fifteen states. This was achieved over a two-year period with spectacular results. LMC principal Vincent Liuzza began that effort by his chairing a private off-site full-day meeting of a majority of the unit’s long-term General Managers—with no corporate executives being allowed—except the Vice President of Operations, who was not allowed to speak—but only to take notes! The GMs were extremely vocal, venting years of frustrations on operations, marketing,maintenance, staffing, communications, etc. This flow of information was used to structure LMC’s Food Cost Control Plan. However, the CFO was realistic and very much aware of the fact that, even though a consultant analyses the company and makes appropriate recommendations, the incumbent personnel must deal with and make some necessary changes to their past habits, culture, policies, modus operandi, etc., in order to implement there commended changes to properly implement the Plan. Therefore, throughout the ensuing two years, the CFO had Liuzza representing him in the weekly operations meetings amongst the VPs and department heads. Liuzza was described as an “embedded” consultant as opposed to one who merely analyses, makes recommendations, and then departs. This turned out to be very helpful, and the results were incredibly successful over a three-year time frame. The CFO then declared that Piccadilly’s food costs in fiscal 2013 were the lowest in its history. See Piccadilly’s “Example of a Completed Engagement” elsewhere on this website. Next, LMC was asked to advise on dealing with its two primary lenders. The company was in default to its largest, but only partially secured, New York investment bank lender, pseudo-name BBB. And its primary, but fully secured, West Coast banker, pseudo-name CCC, was expressing serious concerns. At that time, almost one-third of the company’s locations, spread over 15 states, were operating unprofitably. Therefore, LMC’s recommendation was that the high interest and debt service in its loan agreement with BBB, Piccadilly, without serious debt restructuring and ability to exit the underperforming locations, would be forced into either a Chapter 11 reorganization or Chapter 7 liquidation. LMC’s recommended solution was immediate drafting a plan for a “Pre-Packaged” Chapter 11. Its detailed and comprehensive drafting of that Plan could likely be completed within 90 days. In the meantime, the pressures from secured and unsecured creditors would be increasing. The Plan would call for legally canceling the leases on and closing all the unprofitable units, which would make the company immediately profitable and enable the company to retire the balance of the unsecured deferred debt to be deferred over an affordable term. And AAA would retain full ownership! Once exiting Bankruptcy and having disposed of all the non-productive locations, the company’s annual cash flow (EBITDA) was estimated to be immediately above $4,000,000, resulting in an Enterprise Valuation of $20,000,000 to $30,000,000. Explanation of the Benefits & Mechanics of the Proposed Pre-Packaged Chapter 11 Plan. In an ordinary Chapter 11 proceeding, the company files a Petition to enter a Chapter 11, which puts a hold on all pre-existing financial obligations. Then it must design and file its proposed Plan of Reorganization, which usually takes many months. That Plan must ultimately be approved by all its secured creditors and a majority of its unsecured creditors. These numerous negotiations usually also take months of time and consume very large legal fees. Eventually, if the Plan is successfully approved, certain debts are restructured or eliminated, and the restructured company returns to normal business. But if the Plan is not successfully negotiated with creditors and approved by the court, the company’s assets are auctioned to the highest bidder. The beauty of the Pre-Packaged Plan is that the Chapter 11 petition is not even filed with the court until it is presented to and accepted by the, usually few, major secured creditors, whom, because the Plan provides will be paid in full, all officially agree to and sign the Plan before the Chapter 11 petition is filed with the court. Therefore, the Plan is almost automatically approved by the court in an extremely short period of time. To the degree that unsecured creditors are to be paid in full, even if on longer terms, their approval is automatic, and the Plan is approved. Therefore, enormous legal and other fees are greatly reduced, and the stress on the company, its employees, and its customers is minimized. As in all Chapter 11 bankruptcies, the Pre-Packaged Plan would call for legally cancelling the leases on and closing all the unprofitable units, making the company immediately profitable, retiring the balance of the deferred debt over an affordable term, and AAA retaining full ownership. Once exiting Bankruptcy and having disposed of all the non-productive locations, the new Piccadilly’s cash flow (EBITDA) was estimated to be immediately above $4,000,000, resulting in a valuation of $20,000,000 to $30,000,000. LMC strongly emphasized the urgency of developing and filing such a Plan, thereby retaining control of the future course of the company as opposed to delaying action and “hoping” that neither major creditor will act first, thereby AAA risking everything. The CFO sent the LMC Pre-Packaged Plan to the company’s lawyer, who was a former bankruptcy judge, who agreed with its feasibility and agreed to draft and file the Plan as proposed. His firm agreed, in writing, to the exact fee that LMC estimated, $500,000, covering all pre-and post-filing legal fees. His law firm did exactly that and presented its detailed written document to the company. This Plan, approved by the former bankruptcy judge’s firm, likely would have produced a transformational result for the Piccadilly owner, AAA. However, one year later, after
Historic Fairgrounds Racetrack: Liuzza’s Role in its Chapter 11 Bankruptcy
The Louisiana Horsemen’s and Benevolence Association (an organization of racehorse owners) had sued the Fairgrounds Racetrack in New Orleans for failure to pay the horsemen most of their legal share of video poker proceeds of the Fair Grounds-owned off-track video poker casinos over a 10-year period. The Louisiana Supreme Court awarded the Horsemen a $90,000,000 judgment against the Fairgrounds, which immediately made them the major creditor with a first lien on all the unmortgaged assets the Fairgrounds owned. The Horsemen then demanded payment. The Fairgrounds immediately retained the region’s best bankruptcy lawyer, filed Chapter 11, and subsequently, in bankruptcy terms, is referred to as the “Debtor.” The Horsemen’s corporate law firm (pseudo-name: ABC), which managed the successful lawsuit, hired a bankruptcy law firm, (pseudo-name: DEF) to represent the Horsemen. Several months later the Horsemen’s corporate law firm, ABC, became somewhat concerned about the quality of representation the Horsemen were receiving from DEF. They engaged Liuzza Management Consulting, Inc. to assess the performance of DEF. Over the several months of the engagement, Liuzza generally identified several concerns about DEF’s performance and reported them to ABC. Vincent Liuzza had a concern that the entire value of the Fair Grounds Racetrack entity would likely be less than the amount of the $90,000,000 judgment. If so, then if all the Race Track’s assets would be sold in the bankruptcy process, then that would be the maximum amount that the Horsemen could receive. Therefore, it would be important to have an idea of the total present value of the Racetrack entity, including its off-track betting parlors, many of which included video poker gaming machines. In a Chapter 11 bankruptcy, for the Debtor to retain ownership of the company, it would need to present a deal to all its creditors that they could approve. If not, then the company’s individual assets (or the entire company) would be sold in a courtroom-supervised auction. Liuzza then recommended to the Horsemen’s bankruptcy lawyers that they should get, at least, an informed “guess” on the value of the racetrack as a going concern. The Horsemen’s corporate attorneys declined. Liuzza then did his own valuation of the Racetrack entity, which he concluded was a range of $40,000,000 to $50,000,000. Since this is less than the amount of the judgment, the Horsemen would likely be entitled to receive total ownership of the entire Racetrack and its several off-site betting and video poker casinos in return for settling the $90,000,000 debt. Being of the opinion that the Debtor’s bankruptcy law firm was far more sophisticated and resourceful than the Horsemen’s bankruptcy law firm, Liuzza was concerned, based upon his actual experience in bankruptcy Debtor asset auctions, that these Debtor lawyers would attempt to use all their legal “tricks” to The reason for this is to enable the present owner, or its favored third party, to be legally able to purchase the company at rock-bottom prices, because there would be no other serious bidders. This, of course, would effectively mean that the current Fairgrounds owners would be legally able to buy the Horsemen’s $90,000,000 claim receivable in the auction for a small fraction of that amount because there would likely be no other bidders. Therefore, having sharp lawyers, they would have retired their $90,000,000 payable for maybe $20,000,000 or $30,000,000, while still remaining owners of the Fairgrounds! Liuzza then recommended that the Horsemen propose to the court that they settle the entire case in return for complete and unimpaired ownership of the race track. That would enable the Horsemen to take total ownership and then do a national and well-publicized orderly-managed auction, selling to the highest bidder, thus maximizing the Horsemen’s recovery. Alternatively, they could propose to the court that the Horsemen manage the auction process, write the auction rules, and auction the entire entity through the court process and receive the total proceeds up to $90,000,000, with the unsecured creditors receiving any excess. The Horsemen and both their law firms rejected that idea, and the court declared that the assets be sold, and that the Debtor (the Race Track) would be entitled to set the auction rules and manage the auction process. This could enable the present owner, the Debtor, to buy back its company for less than the true market value suggested by a fair and well-publicized auction price (for example maybe $10,000,000 or $20,000,000), which would then be all that the Horsemen could receive. Of course, the Debtor then proposed to the court that it be entitled to manage the entire auction process, and set all the auction terms, and the court promptly agreed because there was no effective objection from the creditor lawyers. When Liuzza read the Debtor’s proposed terms of auction, he strongly advised ABC that they should vehemently object to those terms. But ABC and DEF appeared uninterested in Liuzza’s recommendation. To Liuzza, it appeared that they did not understand the consequences of not following his recommendation. Therefore, he insisted that both ABC and DEF meet with him for lunch to ensure that each understood, and together they, hopefully, would have a chance to change their minds. It was a good lunch meeting. And once they understood his arguments, they agreed. DEF then filed a motion to remove the most egregious terms in the Debtor’s proposed auction rules, and the court agreed. The auction occurred. Churchill Downs was the buyer for $40,000,000, and the Horsemen netted $32,000,000 after administrative and attorney fees were deducted. Nothing was left for the unsecured creditors. N.B. The consultant had the determination and the skill, fortunately, to change, at the last minute, the minds of his resisting client. As seen in other cases here, some clients continue to resist sound advice, possibly with very good reasons. Nevertheless, sometimes this results in a total loss of all their equity. Examples are Piccadilly Cafeterias, and The Deep-River Logistics Company.
Volunteers of America: Feasibility Study of Creating a Daily Fresh Meal Delivery Service for Charter Schools
Background Situation: The organization is looking to replace several of its smaller food operations with a larger regional service, specifically targeting charter schools. They see a significant need and opportunity in this market compared to commercial competitors. LMC was tasked with conducting a Feasibility Analysis, which included: Recommendations and Approvals: Business Plan Development: Final Approval and Implementation: Fine-Tuning:
The Kenner Airport Casino Truck Stop
(A family-owned company) Clients were four brothers, each in different businesses and professions, who jointly owned a residential trailer-park in Louisiana, having only modest financial returns. They engaged Liuzza Management Consulting, ”LMC,” for ideas on alternative uses. LMC did a feasibility study on possible alternative uses including a commercial land lease. Upon completing the study, LMC’s recommendation was that a video poker truck stop casino was the highest and best use of the property. Louisiana, a few years earlier, had legalized video poker gaming in bars, restaurants, and truck stops. Since Liuzza already had varied experiences in the video poker business and its complex regulatory process, LMC was engaged to spearhead bringing this project to fruition. The gaming regulations for a truck stop casino required the facility to include, in addition to fuel and related sales and ample parking for numerous. 18-wheelers, a restaurant, and a convenience food store. Since none of the brothers had the experience, time, or interest in overseeing this project in its construction or later operation, the first option that LMC recommend was a joint venture with an existing casino truck stop operator, who would contribute 50% of the capital, and receive 50% of the profits plus a management fee. Negotiations were held with two different parties, but neither could agree with the owners on the value of the real estate they the brothers contributed. So, the final arrangement was to find and contract with an existing licensed gaming operator to manage and fund the video poker operation for a percent of the gaming profits. And the owners would lease out the restaurant, C-store, and fuel portions to separate parties. One of the brothers would be responsible for overseeing the gaming operator and the long-term leasing of the other entities. LMC also sourced the design, permitting, engineering and construction of the new buildings and the other legal services required locally. The next phase was coordinating the complex licensing for the gaming operation and having each of the four owners approved for suitability by the Louisiana State Police. Amongst the elements of this transformational process that LMC spearheaded, working closely with and on behalf the owners, were: RESULT: a minimally profitable residential trailer park was transformed into a highly profitable video poker casino.