Revel Casino files for second bankruptcy

August 2014 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

For the second time in a little over a year, Atlantic City’s troubled Revel Casino Hotel has filed for Chapter 11 bankruptcy protection. Revel Entertainment Group, which owns the casino, says the decision to put the casino back into bankruptcy, and subsequently up for auction, had been taken to prevent it closing its doors permanently.

Should the casino be forced to close it would be a significant blow to the company’s 3140 employees and the wider Atlantic City gambling community. In the short term, the casino’s owners have secured a loan of around $125m which will be used to keep the venue open until a buyer can be found. However, the auction process is only expected to attract offers in the $100m to $300m range, and any sale at this level would represent a significant loss on the investment of the firm’s ownership group. The Revel casino and resort cost around $2.4bn during the construction process. The casino, which is the tallest building in Atlantic City, was supposed to be the centrepiece of New Jersey governor Chris Christie’s effort to bring Las Vegas quality gambling to Atlantic City’s declining gaming business. The casino was conceived before the onset of the financial crisis and the global economic downturn had a disastrous effect on the project. As a result, Governor Christie was required to provide the Revel group with a $261m tax package to help with construction of the venue. The tax incentive was required after the casino’s original backers, Morgan Stanley, pulled out of the project, taking a $932m loss in the process. However, despite the tax incentives and the fanfare that greeted the casino’s opening, it has lurched from one crisis to another.

Revel Casino, which initially entered bankruptcy in March 2013, listed liabilities between $500m and $1bn in its latest court filing. The venue only opened its doors in April 2012, yet has been forced to file for bankruptcy protection twice, losing in the region of $260m in the two years it has been in operation. It lost $22m in the first quarter of 2014 alone.

In many respects the tribulations of Revel are an allegory of the gambling industry’s struggles across Atlantic City. Indeed, since 2007 casino revenue from the city has fallen by almost half, down to around $3bn from a high of $5.2bn recorded in 2006. Furthermore, in January 2014 one of the city’s most notable casinos, the Atlantic Club casino, closed following a period of financial difficulty. The closure resulted in over 1650 employees being made redundant. In contrast to Atlantic City’s troubled casinos, other US gambling markets have continued to perform admirably. Non-traditional markets such as Philadelphia, an hour away from Atlantic City, have enjoyed considerable growth while Atlantic City has faltered.

Revel’s initial spell in bankruptcy protection was relatively short; the firm emerged after just two months in May 2013, having gained court approval for a restructuring plan that significantly reduced its enormous debt load. The casino saw its debt reduced by $1.2bn to less than $300m. As part of the company’s first exit plan, Revel engaged in a debt-for-equity swap where the major creditors traded their remaining debt for equity in the newly reorganised firm.

Revel’s second batch of bankruptcy documentation, filed on 19 June noted that Chatham Revel VoteCo LLC owns 27.4 percent of the casino’s outstanding stock, Canyon RC Holdings LLC holds 15.7 percent and American High-Income Trust holds 11.5 percent of the firm. “We will work to reach an agreement with a new owner who will help ensure Revel’s long term financial stability and who shares our commitment to providing Revel’s guests and players an exceptional experience in lodging, gaming entertainment and recreation,” said Revel chief executive Scott Kreeger, in a statement announcing the bankruptcy.

Richard Summerfield