Category Archives: News – Houston Local

Fertitta calls off bid to take Landry’s private, but takes it private, anyway

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Landry's logo Suffice it to say that it’s been an interesting past year and a half for Houston-based Landry’s Restaurants Inc., which owns restaurants such as Landry’s, Rainforest Cafe, Charley’s Crab, The Chart House, and Saltgrass Steak House, as well as the Golden Nugget Hotel & Casino in Las Vegas and Laughlin, Nev.

The saga started in late July of 2007 when the company announced that it was delinquent in its regulatory filings with the SEC and that it was in need of refinancing over $400 million in debt in a rapidly deteriorating debt market.

Shortly thereafter, the company sued some of its bondholders for declaring the company in technical default under their bonds, but the company quickly settled that litigation on not particularly good terms.

A few months later, Landry’s announced in January 2008 that its CEO and major shareholder (39%), Tilman Fertitta, had made an offer to take the company private by buying the other 61% of the company’s stock for $23.50 share, which worked to be a $1.3 billion deal, including debt.

That offer seemed all well and good, particularly given that the proposed purchase price was a 40% premium over the $16.67 share price at the time of the offer.

Unfortunately, a spate of shareholder lawsuits followed Fertitta’s bid. By early March, 2008, it was apparent that Fertitta’s bid was so speculative that he hadn’t even lined up financing for it.

So, the following month, Fertitta lowered his offer to $21 per share because of "tighter credit markets", and Landry’s announced that it had accepted that price in June.

But by the fall, the financial crisis on Wall Street had roiled credit markets even further and Hurricane Ike caused considerable damage to several Landry’s properties. So, in October, Fertitta lowered his offer to $13.50 per share.

Then, on Monday of this week, the company announced that it was terminating the proposed deal with Fertitta. The company contended that the SEC was requiring the company to issue a proxy statement disclosing information about a confidential commitment letter from the lead lenders on the buyout deal. The company is negotiating with those same lenders to refinance the bond indebtedness that the company promised to refinance in connection with October, 2007 litigation settlement noted above. Inasmuch as the lenders’ commitment for financing Fertitta’s buyout required that the terms of the commitment remain confidential, the company elected to terminate the buyout deal rather than risk that the lenders would declare a default for breach of confidentiality and back out of the financing commitment for the buyout, as well as the negotiations on the refinancing of the bond indebtedness.

Oh yeah, amidst all this, Landry’s stock closed at $6.54 per share today.

Meanwhile, what has Fertitta been doing while his take-private bids have languished and the company’s stock has plummeted to historic lows?

He has been buying more Landry’s stock. So much so that he now controls 56.7% of the company’s shares.

That’s right. Landry’s board failed to obtain a standstill agreement from Fertitta while his buyout offers were pending over the past year.

As Steve Davidoff notes, this is "truly worthy of Deal From Hell status." Loren Steffy has the same take.

While Landry’s directors are checking on the amount of the company’s D&O policy, I wonder whether Landry’s lenders will follow through on the refinancing negotiations for the bond indebtedness in light of the market’s hammering of Landry’s share price?

If that refinancing doesn’t happen, then those bondholders who Landry’s sued back in August of 2007 will likely not be easy for the company to deal with.

In that case, maybe Fertitta’s additional purchases of Landry’s stock won’t look so smart after all.

Stay tuned.

Can Judge Kent receive a fair trial in Houston?

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Judge Kent By now, most folks have heard that the government has filed a superceding indictment against U.S. District Judge Sam Kent alleging sexual abuse against a second federal employee and also obstruction of justice in connection with the Fifth Circuit’s previous investigation into the allegations. The previous posts on Judge Kent’s case are here.

As this Mary Flood/Chronicle article notes, Judge Kent faces an enormously difficult fight for his life in the upcoming trial. Given the latest allegations, my sense is that his chances are remote of finding a Houston jury that is not tainted by the lurid local news reports on the case.

As of this date, Judge Kent’s formidable defense attorney — Dick DeGuerin — has still not requested a change of venue. Should he now?

Although Racehorse Haynes is still trying cases well into his 70’s, DeGuerin is now widely regarded as having accepted the baton from Haynes as being the dean of Houston’s outstanding criminal defense bar. Given the difficulty of the case against Judge Kent, could this case be DeGuerin’s equivalent of Hayes’ career-defining T. Cullen Davis case?

Stay tuned.

As the Rockets’ World Turns

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les_alexander With the football season winding down in these parts, folks are finally noticing that the Houston Rockets are approaching the halfway point of the NBA season and again look like an also-ran in the playoff race. It’s now been a dozen years since the one-time back-to-back NBA champions have won a mere playoff series.

What happened this time? Dave Berri thinks that Ron Artest has not been the answer.

Meanwhile, Rockets owner Les Alexander has been getting hammered in areas other than basketball, too:

Houston Rockets owner Leslie Alexander has seen his 20% stake in First Marblehead Corp., once valued at nearly $1 billion, plunge to about $15 million. The company, which packages student loans and sells them to investors, saw its business evaporate in 2008. Its shares fell more than 90% last year to about $1.

Thankfully for Alexander, his original investment in the company was only $4 million and — before the 2008 meltdown — he sold a portion of his company stock for $250 million, a substantial portion of which was probably used to pay a $150 million divorce settlement.

What I can’t figure out is whether all of that makes it harder ("We’re paying him what?!") or easier ("It’s only money!") for Alexander to pay Tracy McGrady a total of $40 million over this and next season?

Hayes Carll is back

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The Woodlands native Hayes Carll (earlier post here) is back in town for the holiday season, playing tonight in downtown Houston at Warehouse Live and on Tuesday the 30th at Dosey Doe in The Woodlands. If you have not had the pleasure of enjoying a live performance of this latest in a long-line of talented Texas singer-songwriters, then check out one of his shows this week. You will not be disappointed.

Tom Alexander, R.I.P.

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I lost an old friend and Houston lost one of its most colorful characters on this past Sunday morning — legendary Houston trial attorney Tom Alexander died of a heart attack at the age of 78.

The Chronicle story on Alexander’s death is here and Richard Connelly of the Houston Press chimes in here). The memorial service will be held at 11 a.m. tomorrow morning at St. Paul’s United Methodist Church, 5501 Fannin in the Museum District of Houston.

Alexander was one of Houston’s most accomplished trial lawyers, the kind of rare quick-read who could prepare for a trial by reading the case file on his way to the courthouse. Inasmuch as he had such an engaging personality, articulate delivery and quick wit, judges and jurors naturally gravitated toward him.

But Alexander was one of those larger-than-life characters who was much more than just a fine trial lawyer.

First, he was a loving husband, father and grandfather.

Alexander was also was a true sportsman who loved and supported intercollegiate and professional sports of all kinds. He loved to golf and was an original member of Champions Golf Club, where he owned a weekend cottage that allowed him to keep up with his good friend, Champions owner Jack Burke. Born and raised in Kentucky, Alexander was also an avid horseman who could handicap thoroughbreds with the best of them.

Moreover, it wasn’t all trial tactics and sports with Alexander. Whether the subject was opera, politics, philosophy, poker, theology (he gave a lay sermon at church once entitled “Can You Fistfight and Still Be a Christian?”) or simply the latest gossip in Houston’s professional community, Tom Alexander would engage and stimulate you. Perhaps not always the way you wanted, but always in a way that would make you think about the basis of your beliefs.

Alexander’s vivacious wit and personality is perhaps best summed up by one of the funniest Houston courthouse anecdotes that I’ve ever heard.

Years ago, Alexander was hired by the rich husband in an ugly divorce. The vengeful wife hired another veteran of the Houston legal community, the late Robert Scardino, Sr., the father of noted Houston criminal defense attorney, Robert Scardino, Jr.

Inasmuch as there were no children of the marriage and the value of the community estate was well-established, there was really nothing for Alexander and Scardino to fight about in the divorce.

However, the husband and wife hated each other, so they directed Alexander and Scardino to be nasty with each other for as long as possible. And these two old warhorses were happy to oblige.

After about a year or so of bickering, the family court judge tired of Alexander and Scardino fighting. So, he set the case for trial.

Realizing that there was really no reason to use precious court time to split a well-defined community estate, the family court judge called Alexander and Scardino into his chambers the morning of trial and hammered out a property settlement in an acrimonious two-hour session.

Exhausted from dealing with Alexander and Scardino, the family court judge addressed both men gratefully at the conclusion of the session:

“Mr. Alexander and Mr. Scardino, thank you for working with me in settling this case and saving the court valuable time for other cases.”

“Now, the final issue is the amount of Mr. Scardino’s fee for representing the wife in this case. Mr. Scardino, what do you think is fair?”

“Well, Judge,” replied Scardino. “This has been a hard-fought case and I don’t want the amount of my fee to be the final problem in the case. So, I tell you what I’m willing to do.”

“I don’t know what the amount of Mr. Alexander’s fee has been for representing the husband in this case,” Scardino observed. “But I trust Mr. Alexander.”

“So, to put this all behind us,” offered Scardino. “Whatever Mr. Alexander’s fee has been for representing the husband in this case, I’m willing to take the same amount for representing the wife. What’s good for Mr. Alexander is fine with me.”

“Why, Mr. Scardino,” gushed the judge. “Thank you for that creative and statesmanlike approach to resolving this final issue. I really appreciate that.”

Turning toward Alexander, the judge asked: “Mr. Alexander, what do you think about Mr. Scardino’s eminently reasonable proposal?”

Alexander sat in deep thought for a moment. Then, he leaned toward Scardino, got right up in his face and — undoubtedly with a twinkle in his eye — declared:

“Why, you greedy sonuvabitch!”

Phillip G. Hoffman, R.I.P.

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Phillip HoffmanPhil Hoffman, inarguably one of the most important university presidents in the history of the University of Houston, died Wednesday at the age of 93. The Chron’s Lynwood Abram penned a nice article on Dr. Hoffman here.

When Dr. Hoffman took over the presidency of the University of Houston in 1961, UH was a sleepy, segregated city college of about 12,000 students. By the time Dr. Hoffman retired 16 years later, UH had become a fully-integrated university system of four campuses with an enrollment of over 30,000 students. Two years after taking over at UH, Dr. Hoffman led the legislative effort to have the university accepted into the Texas state university system.

Although the Chron’s article on Dr. Hoffman’s death notes the foregoing, the fact that UH is a far younger institution than the other two main Texas university systems — the University of Texas and Texas A&M University — is largely ignored by the Chronicle and the rest of the mainstream media. Given the far inferior resources that UH receives from the state relative to UT and A&M, UH is currently providing the best bang-for-the-higher-education-buck of the three systems. That is an impressive part of Dr. Hoffman’s formidable legacy.

A memorial service is scheduled for Dr. Hoffman at 10:30 a.m. Monday at the First Presbyterian Church in the Museum District, 5300 Main.

A good idea, but . . .

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New Picture The Chron’s top-notch Medical Center reporter Todd Ackerman reported yesterday that two venerable Houston academic — Baylor College of Medicine and Rice University — are in preliminary discussions regarding a possible merger (the Chron’s excellent Science reporter Eric Berger also comments here).

This makes sense on many levels. Baylor and Rice are located near each other in the Medical Center area, so sharing faculty members between the two institutions would be a snap from a logistics standpoint. Indeed, the attraction of being able to teach and research at both institutions would be a valuable perk for both schools to attract talented teachers and students. Both schools have excellent academic reputations, so it’s a good match from that standpoint, too.

But Ackerman zeroes in on the main problem with the merger. As usual, it involves money:

Rice is the more affluent of the two institutions. As of June 30, its endowment was $4.6 billion. As of Sept. 30, Baylor’s was $954 million. [.  .  .]

One Rice professor said the key issue from the university’s perspective will be making sure there’s a firewall between Rice’s endowment and Baylor’s.

A "firewall" between the two institutions endowments? Come on, one of the main reasons why the merger makes sense is that Baylor would have access to Rice’s superior capital. The benefit from Rice’s standpoint is the association with a fine medical school that, with access to a better-capitalized endowment, may well propel itself into the best medical school in the country. That is precisely the type of academic excellence that Rice should be pursuing.

Which reminds me of a conversation that I had years ago with a member of the University of Houston Board of Regents. Given the need of Houston and Texas for more Tier 1 research institutions, I observed to this UH regent that I thought it was a good idea for the UH system to merge with the Texas A&M University System.

One one hand, the merger makes sense from UH’s standpoint because it would provide the chronically-undercapitalized UH (endowment about $750 million or so) with access to capital (A&M’s endowment is between $6-7 billion) that is the biggest obstacle in UH’s path to Tier 1 status.

On the other hand, the merger makes sense from A&M’s standpoint because UH would provide A&M with the urban presence that it has always lacked and UH’s central campus in Houston that A&M could use as a carrot for attracting better teachers and students. Moreover, A&M for years has desired a law school and UH would deliver a very good one.

So, I asked the UH regent, such a merger makes sense, doesn’t it?

The UH regent proceeded to give me a half-dozen reasons why the proposed merger would never work, most of which were tied to the fact that he would no longer be a member of an independent university system board if such a merger were consummated.

That is precisely the attitude that has placed Texas behind states such as California and New York in the development of Tier 1 research institutions and all the benefits that such universities provide to the state and its communities. Here’s hoping that similar attitudes don’t scuttle what appears to be a very good idea for Rice, Baylor and Houston.

Almost a month after Hurricane Ike

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Hurricane Ike A friend of mine who is a homebuilder in The Woodlands passes along the following regarding his experience in overseeing a crew rebuilding the neighborhood of his weekend home in Hurricane Ike-ravaged Galveston:

Just back from Galveston after 3 weeks.  We suffered ancillary damage, but nothing structurally damaging. I went down with 80 rds of .40 cal and came back with a clip and a half. 

Snakes have taken over the dunes for now. Devastation is everywhere and we are helping some 61 homes get their lives back together. I have simply never seen such damage.

When you drive over the Galveston Causeway Bridge, you are confronted with hundreds of boats of all sizes lining the road, the median and the bay. Most homes inside the seawall suffered 10 feet of flooding, especially in the historic Strand District.  Downtown Beirut in the 1980’s looked better.

Moving to the seawall, the historic Balinese Room is gone. The Flagship Hotel lost its entry way and appears to be a total loss. Power and water are spotty — I went 2 weeks without either. Traveling to our West End home is like driving through the Northeast after a winter storm — sand is piled 10 feet high along both lanes and you sense you are in a fantasy winter wonderland.

Many properties immediately off the seawall are totally destroyed, sitting in the Gulf. You can literally walk under their foundations.  Stench and foul orders are everywhere — even the stoutest are easily overcome. It will be years, if ever, before Galveston will be restored or hopefully rebuilt to a higher standard. The homes built in the last 5 years according to the 160 mph wind standard suffered little damage, but most others were severely damaged or lost completely. Our crews have worked 16 hrs./day for 3 weeks to restore our neighborhood and are moving to help others at this time. The bright spot is that I have come to know my fellow homeowners in our neighborhood quite well.

The old site of the SeaArama Marineworld is now a landfill with three mounds that could easily fill the Astrodome. I have no idea what they will do with this matter as cranes are working 60’ above street level at this time. We have brought in heavy equipment and crews from The Woodlands to Junction, Texas.  The cowboys from Junction say they have never seen rattlers so big.

We completely lost our dunes, which were over 15’ high. It now looks like we are seaside in Malibu.

Reporting from an R and R encampment, I remain .  .  . 

And as bad as the damage is in Galveston, the devastation in Bolivar Peninsula to the northeast is even worse.

The Rothko Chapel

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rothko It was the 105th anniversary of Mark Rothko’s birth earlier this week, so it’s a good time to learn a bit more about the artist whose paintings hang in one of Houston’s most remarkable places, the Rothko Chapel on the campus of the University of St. Thomas (earlier post here).

Tough day at the office

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Clear Thinkers reader Charles Satterfield passes along these pictures of a trading office on the sixth floor of JP Morgan Chase Center, looking out toward the blown-out windows on the east side of JP Morgan Chase Tower (the tallest building in downtown Houston), taken shortly after Hurricane Ike blew out dozens of windows on the building’s east side during the early morning of Saturday, Sept 13th. Going on two weeks after the storm, over half a million Houston area residents remain without power and about 250,000 have no running water.

601 Travis Pic 7

601 Travis Pic 6 Trading Desk