The Privé and Living Room nightclubs at Planet Hollywood resort in Las Vegas are losing their lease with Planet Hollywood.
The adjacent and jointly operated clubs, which filed for bankruptcy protection in Miami in November, filed a motion Wednesday to dismiss the bankruptcy case because of the lease issue.
"The debtors are unable to operate their nightclubs without the lease and, as such, have no business to reorganize in Chapter 11," attorneys for Privé said in the filing.
Privé did not say in its filing when or if the clubs would close. Planet Hollywood had no immediate comment on the situation.
A spokeswoman for club owner the Opium Group in Miami could not immediately be reached for comment Thursday and attempts to reach Privé management in Las Vegas for comment were unsuccessful.
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Privé's filing noted that Planet Hollywood, which was acquired by Harrah's Entertainment Inc. after Privé filed for bankruptcy, is owed about $300,000 in past-due rent and other charges under the lease plus "an alleged amount of approximately $200,000 in fines arising from county code violations at the leased premises."
After deducting a credit of $68,000 Privé claims to be owed, Privé may owe Planet Hollywood up to about $440,000, the nightclubs said in their filing. On top of that, Privé may be liable for some $1.5 million owed to construction companies that built out the Privé space, the filing said.
Facing a deadline of Saturday to "assume or reject the lease" under the bankruptcy laws, Privé said it's decided to reject the lease.
"Planet Hollywood has informed the debtors that it is unwilling to restructure the lease obligations and/or amortize the amounts owed thereunder -- totaling up to nearly $2 million in past-due lease charges plus potential mechanics' lien (construction claims) -- under a Chapter 11 plan," the Privé filing said. "Without any concession by Planet Hollywood, the debtors are unable to assume the lease."
Privé added that conversion of the case to a Chapter 7 liquidation would not be feasible since Privé's physical assets are worth far less than what is owed to Planet Hollywood. Planet Hollywood's execution of its lien against Privé "would leave no value for the estate and unsecured creditors in a Chapter 7 liquidation," Privé's filing said.
Attorneys for Harrah's have been pressuring Privé and the Living Room in their bankruptcy case to either pay their past-due rent and extra security expenses or vacate the premises.
Extra security was hired by Planet Hollywood for the clubs after incidents last year in which the clubs were temporarily closed for numerous violations of Clark County and Nevada Gaming Commission violations.
In a March court filing, Harrah's Planet Hollywood subsidiary said these included instances where:
--Privé personnel removed inebriated patrons and left them unattended in the Planet Hollywood casino in various states of consciousness
--Privé patrons used or were under the influence of controlled substances while at the club
--Privé patrons alleged Privé employees physically and sexually assaulted them
--Privé was cited by Clark County Department of Business License officials for allowing topless and lewd activity; and for failing to cooperate with agents
--Privé allowed minors to enter the clubs and served them alcohol
Besides the lease dispute with Planet Hollywood, Privé had suffered another setback in the bankruptcy case when Judge A. Jay Cristol ruled in January that contractors Sun City Electric and Midwest Drywall could pursue their lien lawsuits against Privé in state court.
Privé has reported that its cash sales in January totaled $752,703 and that after payment of expenses, including rent, it lost about $153,000 for the month.