PDS Gaming International has asked the U.S. Bankruptcy Court in Delaware to force Baha Mar to either accept or reject a master lease – and two accompanying lease schedules – or if not, to clear the way for it to recover more than 1,000 pieces of gaming equipment the company said are essential for Baha Mar to operate a “Las Vegas-style” casino.

The master lease is for $16 million of casino equipment Baha Mar has on its premises, and PDS said if the court doesn’t force Baha Mar to accept or reject the lease, it should force the developer to pay the rent for that equipment going forward on a current basis, or let PDS repossess the equipment.

PDS CFO Peter Cleary reported that Baha Mar signed a master lease with PDS on January 27, 2015, for “up to 1,100 Class Three gaming devices,” along with associated equipment such as custom chairs, slot system brackets, specialty sign packages and system hardware – the Bally Technologies ACSC Casino Management System. Two separate lease schedules describe the particulars of the lease arrangements.

PDS argues that Baha Mar defaulted on that equipment master lease by failing to pay the interim and basic rent totalling just over $700,000. And further, the company declared that Baha Mar has not made any payments since it filed for bankruptcy on June 29, 2015 and has not included the payment of PDS leases in its proposed budget. Since the developer appears to have not made provisions to pay the gaming company, PDS is left bearing the risk for Baha Mar’s “post-petition non-performance” with no ability to recover the loss.

“In light of the foregoing, PDS requests an order from this court compelling Baha Mar to assume or reject the master lease, Lease Schedule One and Lease Schedule Two, so that PDS can assess, assert and protect its remedies and rights under the PDS lease documents as to the equipment,” Cleary said.

“Alternatively,” PDS said in its motion, “if the court is not willing to compel the immediate acceptance or rejection of the master lease and lease schedules, the court should require Baha Mar to stay post-petition current on their obligation to PDS. Otherwise, the harm that will be sustained by PDS will far outweigh any benefit to the estate.”

PDS is a limited liability company (LLC) out of Nevada, and is wholly owned by Minnesota PDS Gaming Corporation.

Lease Schedule One

“The equipment is to be used in connection with the business described as and commonly known as the Baha Mar Casino and Hotel doing business at One Baha Mar Boulevard,” Cleary said.

He explained the rental terms, asserting that the master lease enshrines Baha Mar’s obligation to pay all rent, and that “the rights of PDS or its assignees in and to such rent is absolute and unconditional under all circumstances”. That lease, he notes in the court documents, also enshrines express ownership of and title to the equipment in question.

Cleary told the court that the “capitalized cost” of the items subject to Lease Schedule One was $7.5 million. He said the commencement date of that lease was January 30, 2015, but the term of the lease began on June 1, 2015, with a term running for 48 months.

According to Cleary, Lease Schedule One required Baha Mar to pay interim rent of $59,267 on the 1st of March, April and May 2015, and after the interim period – that is, beginning June 2015 and running for the 48 succeeding months – the basic rent increased to $169,87.

Lease Schedule One covers a number of machines manufactured by IGT, including slot machines (the IGT universal slant) and bar top poker machines.

Lease Schedule Two

Lease Schedule Two was executed on March 9, 2015. The capitalized cost of the items covered by this lease is $7.65 million. Interim rent from April 2015 through June 2015 totalled $105,542. As of June 2015, the rent rose to $172,221 for the remaining 48 months.

This lease covers Aruze virtual poker stations and other video gaming machines.