Casino Loses License, Threatens Bankruptcy

Atlantic City CBS

A parent company of the Tropicana Casino and Resort raised the possibility Thursday of filing for bankruptcy if it cannot quickly overturn the denial of its casino license or work out a new deal with its lenders.

Tropicana Entertainment LLC filed an appeal Thursday of a decision by state casino regulators that denied it a new license. A judge refused to consider the appeal on an emergency basis, saying the Tropicana can present its case through normal channels, which could take several weeks.

But the Tropicana might not have that much time. It issued a statement Thursday saying that the state Casino Control Commission's denial of its license will cause the Tropicana to default on a complex credit agreement with its lenders, who would be entitled to accelerated repayment of the loan.

"There can be no assurance that the lenders will not accelerate, which could compel the company to seek alternatives, including, without limitation, bankruptcy protection."

The moves came as a state-appointed trustee prepared to take charge of the troubled property, which lost its license Wednesday after nearly a year of turmoil that included massive layoffs, problems with cleanliness and service, and poor compliance with state casino regulations.

The casino and its hotel - the largest in New Jersey with 2,129 rooms - continued to operate on Thursday, and state officials stressed that there would be no disruption to the Tropicana's operations, regardless of who owns it.

The state Casino Control Commission appointed former state Supreme Court Justice Gary S. Stein to oversee the Tropicana's operations until it can be sold.

Affiliates of Kentucky-based Columbia Sussex Corp. said the denial of the license would trigger a default "on a complex cross-collateralized credit agreement" affecting numerous companies in several states. Such a default could affect casino licenses the company holds in other states, it wrote in its application to Appellate Judge Joseph F. Lisa.

The casino commission's decision marked only the second time in the 29-year history of legalized gambling in New Jersey that it had denied a license renewal. The last time was in 1989 when it ruled that the owners of the former Atlantis Casino were too financially shaky - to the point where regulators feared the casino did not have enough cash on hand to pay jackpots to winning gamblers.

Stein planned to be in Atlantic City on Friday to meet with the casino commission.

"It's different, I'll tell you that," said Stein, who served on New Jersey's high court for more than 17 years. "You learn from everything you do in life. I'm sure I'll learn something about casinos."

Stein said he could not speculate on who would run day-to-day operations at the Tropicana, but said it would not be him.

Meanwhile, speculation swirled about possible purchasers for the Tropicana if Columbia Sussex is not successful in overturning the commission's decision. Numerous gambling companies have expressed interest in either entering the Atlantic City market, or expanding their presence here.

With the current cost of acquiring land, clearing it and building a new casino hovering around $2 billion, it could prove cheaper to buy an existing casino.

David Cordish, president and chairman of the Baltimore-based Cordish Company, which was rumored to be interested in Donald Trump's three casinos, said his firm is considering the Tropicana.

"We have been approached on multiple levels and are taking a very, very hard look," he said. "It fits perfectly with our Atlantic City strategy and existing holdings in Atlantic City."

Cordish built The Walk, a $110 million retail-entertainment district in the heart of Atlantic City between the convention center and casinos.

One name on virtually everyone's short list of candidates is Dennis Gomes, the Tropicana's former chief executive who oversaw the property when it was owned by Aztar Corp. He led a failed effort to buy one or more of the Trump casinos this summer, and declined comment Thursday on whether he's interested in the Tropicana.

Casino analysts predicted great interest in the Tropicana from outside suitors.

Deutsche Bank Securities Inc., in a report Thursday morning, named Gomes and Wynn Resorts as potentially interested buyers. A message left with Wynn Resorts seeking comment was not immediately returned Thursday. Penn National Gaming declined to say whether it was interested.

Harrah's Entertainment said it would not pursue the Tropicana because it already owns four Atlantic City casinos and expected to run into anti-trust problems if it tried to buy a fifth in this 11-casino city.

Dan Lee, chairman of Pinnacle Entertainment, which is building a new $1.5 billion casino here on the former Sands Hotel casino site here, lost a bidding war with Columbia Sussex last year to buy the Tropicana.

"We'd look at the Trop if asked," he said. "Never say never, and it's always a function of price. But it's pretty clear it's of less interest to us than it would have been two years ago."

Stein said he could not speculate on who would run day-to-day operations at the Tropicana, but said it would not be him.

Meanwhile, speculation swirled about possible purchasers for the Tropicana if Columbia Sussex is not successful in overturning the commission's decision. Numerous gambling companies have expressed interest in either entering the Atlantic City market, or expanding their presence here.

With the current cost of acquiring land, clearing it and building a new casino hovering around $2 billion, it could prove cheaper to buy an existing casino.

David Cordish, president and chairman of the Baltimore-based Cordish Company, which was rumored to be interested in Donald Trump's three casinos, said his firm is considering the Tropicana.

"We have been approached on multiple levels and are taking a very, very hard look," he said. "It fits perfectly with our Atlantic City strategy and existing holdings in Atlantic City."

Cordish built The Walk, a $110 million retail-entertainment district in the heart of Atlantic City between the convention center and casinos.

One name on virtually everyone's short list of candidates is Dennis Gomes, the Tropicana's former chief executive who oversaw the property when it was owned by Aztar Corp. He led a failed effort to buy one or more of the Trump casinos this summer, and declined comment Thursday on whether he's interested in the Tropicana.

Casino analysts predicted great interest in the Tropicana from outside suitors.

Deutsche Bank Securities Inc., in a report Thursday morning, named Gomes and Wynn Resorts as potentially interested buyers. A message left with Wynn Resorts seeking comment was not immediately returned Thursday. Penn National Gaming declined to say whether it was interested.

Harrah's Entertainment said it would not pursue the Tropicana because it already owns four Atlantic City casinos and expected to run into anti-trust problems if it tried to buy a fifth in this 11-casino city.

Dan Lee, chairman of Pinnacle Entertainment, which is building a new $1.5 billion casino here on the former Sands Hotel casino site here, lost a bidding war with Columbia Sussex last year to buy the Tropicana.

"We'd look at the Trop if asked," he said. "Never say never, and it's always a function of price. But it's pretty clear it's of less interest to us than it would have been two years ago."
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