Judge OK's Revel's Bankruptcy Plan
A judge has signed off on Revel Atlantic City’s bankruptcy plan, and the beleaguered casino should come out on the other side in a better place. The casino, which has never turned a profit since it opened one year ago, racked up a staggering $2.4 billion in construction costs.
When the New Jersey Division of Gaming Enforcement released April gambling revenue numbers late last week, Revel was at the bottom of the heap of the city’s twelve casinos, posting a 40 percent decline over April of 2012, its opening month.
Revel opted to enter bankruptcy as part of a deal with its creditors, to whom it owed some $1 billion. In exchange for providing a loan to pay off existing debt as well as floating additional loans in the future, the creditors will receive an equity stake in the property. The bankruptcy proceedings began a few months ago.
The US Bankruptcy Judge overseeing the case, Judith Wizmer, seemed optimistic for Revel’s recovery prospects, writing, “Notwithstanding the challenges that await the debtors … a reasonable prospect of success has been shown on this record.”
The bankruptcy – and the whole revenue problem – are not the only issues facing Revel, Atlantic City’s newest casino. They are also confronting law suits from construction contractors who still have not been paid for their work on the property. Lawyers representing these companies point to Revel’s failure to generate any positive revenue as a reason for money to be earmarked during the bankruptcy proceedings that could be used to pay off these firms should they win their suits against the casino.
Remarking on those cases, Judge Wizmur said, “While we might question the achievability of the precise numbers … we can rely on them in a general sense.”
“Feasibility is never guaranteed. What we are looking for is reasonable probability of success. … Here, I believe that showing has been made,” the Judge went on.
While Judge Wizmur appeared at least semi-confident that Revel will be able to improve its position, the company’s Chief Restructuring Officer, Dennis Stogsdill, warned that profitability is not a short-term prospect.
“We’re going to continue to lose money. There’s a turnaround period,” Stogsdill said, going on to add, “Very shortly we will be converting the casino to smoking, which will increase revenue dramatically.”
Revel’s struggles are being mirrored all over Atlantic City, where revenue has been on the decline every year since 2006 as New Jersey casinos face mounting pressure from casinos located in the nearby states of Delaware and Pennsylvania. April’s double-digit revenue decline was nothing new for the city, which is still struggling to recover from last fall’s Hurricane Sandy. Over 360,000 homes were destroyed in New Jersey when the storm hit last October, with Atlantic City suffering significant damage.
In the wake of April’s dismal numbers, eyes will now be turning to the stymied purchase deal between PokerStars and land-based casino the Atlantic Club. Later this week, there will be a court hearing in the case.
Online poker behemoth PokerStars filed suit against the Atlantic Club earlier this month, when the casino moved to terminate a purchase deal that had been in the works since late last year. PokerStars alleges they have already invested $11 million toward a $15 million purchase price.
