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CRUISE LINKS (with Gary Bembridge)

Monday, April 17, 2006

The Queen's transition - It's complex for some and not for others, but meaningful to the owners.

 
 
The Queen Mary bankruptcy case involves a tangle of investors, creditors, lawsuits, payments between a nonprofit operator and for-profit lessee, and $5 million worth of disputed rent credits. Complicated?
 
Not at all, according to the newly appointed bankruptcy trustee assigned to straighten it all out. Howard Ehrenberg, appointed by the bankruptcy judge, says it all looks pretty familiar to him: a lease dispute, a company with too little capital and creditors threatening to foreclose. Same old same old.
The difference, Ehrenberg told writer Wendy Thomas Russell, is that it involves a million-dollar ship of considerable notoriety. (The million dollars was a figure of speech; the operator, Joseph Prevratil, values the Queen at up to $50 million. Our guess would be in between, but closer to 1 than 50.)
Ehrenberg is a partner in an L.A. law firm specializing in bankruptcy cases and he's seen a lot of strange ones, though few that made headlines. From a Long Beach taxpayer's point of view, he is exactly what's needed to make some sense of the Queen Mary's problems.
 
From Prevratil's point of view, this is a major turning point in the history of the old ocean liner, and certainly in his life. He decided to give up oversight of his company, Queen's Seaport Development, Inc. (QSDI) when he couldn't put together a reorganization plan before the bankruptcy court's deadline of May 20. A creditors' committee and the city of Long Beach already favored the idea. The judge, Vincent Zurzolo, quickly appointed Ehrenberg.
This is the best shot the true owners of the ship, Long Beach taxpayers, have at figuring out who owes what, and the best chance creditors and investors have at protecting their interests. The likeliest outcome is that the city isn't entitled to the whole $5 million it demanded; another developer will take over the choice waterfront acreage alongside the Queen; the initial investor in QSDI could come out reasonably whole; lawsuits from latecomers will amount to little or nothing; and that someone new will be helm of the RMS Foundation, which actually operates the Queen Mary.
 
For now, Prevratil has managed to keep the RMS
Foundation, which he runs, out of the bankruptcy proceedings, although that could become a challenge. Money has passed back and forth among the foundation, QSDI and Leisure Horizons, (another company owned and operated by Prevratil), in the form of payments, loans and loan repayments. And one thing is clear. City officials will have their way about separating Prevratil and the Queen Mary after 13 years. They aren't going to forgive him for taking cash out by selling a 24 percent interest in his dockside development rights, or for the embarrassment caused by putting his company into Chapter 11.
What a change that attitude is from the days when the downtown establishment celebrated Prevratil as the only person who could have saved the Queen from sale or scrap yard in 1993 after the Disney Co. gave up on the ship. Prevratil had managed the Queen Mary before under a previous ownership, had briefly run the Port of Long Beach as executive director, overseen an on-budget $100 million expansion of the city's Convention Center, helped get the Long Beach Symphony back on sound financial footing, and managed a turnaround of the Riverside Sheraton and convention center.
 
When all this does finally get sorted out, there may be no heroes. But there ought to be. City officials were right, in 1993, to keep the Queen Mary in town and Prevratil was the right person to put in charge. The deal should have been structured better and overseen better, but in the years since then, the ship has put millions of dollars into the general fund in rent, hotel taxes and sales taxes; has charmed many of the taxpayers who own it, and has become a symbol of its home city all over the world.
That's special. And the transition is meaningful, except possibly to trustee Ehrenberg, who might find it all in a day's work.
 

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posted by Gary B at 4/17/2006 12:44:05 PM