According to a lawsuit filed in Las Angeles County by 60 Chinese nationals who lent money to the SLS project in exchange for U.S. citizenship: the SLS has not turned a profit since opening in 2014 and is “on the verge of bankruptcy.”
An Investment Deal
The investors lent approximately $400 million to the owners of SLS, to convert the dated Sahara into the more contemporary SLS Las Vegas. The loans were organized under the EB-5 Pilot Program which allows foreign citizens the opportunity to receive U.S. citizenship if they invest $500,000 into an “at-risk” large-scale project that creates jobs. The loan the 60 Chinese investors signed carried a mere .5 interest rate; each investor paid about $45,000 in admin fees to invest in the project and has been paying a yearly management fee.
Out of the 60 individuals involved in the class-action lawsuit, none have received their permanent green card. The plaintiffs are seeking $255 in damages plus attorney fees and other costs.
Avoiding Bankruptcy Through an SLS Property Sale
Stockbridge Capital Group agreed in May to sell the SLS casino to Meruelo Group. Stockbridge has been putting millions of dollars a year into SLS to keep it afloat, and avoid filing for bankruptcy in Las Vegas. Stockbridge called the lawsuit “without merit” and said that lenders and shareholders fully support the proposed sale. Meanwhile, Meruelo is seeking to renegotiate the loans from the investors; the loan comes due in 2018 and 2019, along with another $185 million loan from a separate party. Meruelo is instead offering to repay the investors by 2023 (the amount owed plus interest.) That offer is Meruelo’s third offer since May. The investors have not approved.
Because the Chinese investors and Meruelo could not reach an agreement, Meruelo has been prevented from receiving final approval by the Gaming Control Board.
A Deal Can’t be Reached
Jeffrey Bell is the attorney representing the Chinese investors. He stated, “We either consent to the sale to Meruelo, or the company will file bankruptcy—that is what we are being told verbatim.” The investors claim the proposed new deal will result in a “material change” to the original business plan, which they claim is not allowed by the EB-5 rules, and will threaten their chance at receiving U.S. citizenship.
The American Dream Fund believes the Meruelo deal is the best way to avoid bankruptcy and ensure the Chinese investors receive their permanent green cards.