Revel Casino Opened in April 2012, But Has Filed Bankruptcy Twice in 15 Months
Revel Casino received permission from a judge on Friday to borrow $23.9 million. The loan would allow the Revel Casino to remain in operation for another month. Meanwhile, the casino’s owners are trying to locate a buyer. Earlier in the week, a spokesman for the Revel Casino said new ownership with the patience and finances to withstand the financial crisis is needed.
The Atlantic City casino filed for Chapter 11 bankruptcy on Thursday. It was the second bankruptcy filing in 15 months. The casino has only been in operation for 26 months, and has been in constant financial crisis since its opening.
History of Financial Trouble
In fact, the casino faced troubled even before its opening, when Morgan Stanley pulled out of the development project with a loss of over $900 million. In 2014, the operation has lost over $75 million. Under such circumstances, major changes are required, because no business can sustain such losses perpetually. The new owners will need deep pockets and a long term plan.
John Cunningham is an attorney for White & Case attorney, which represents Revel Casino. In court on Friday, Cunningham told Judge Gloria Burns. “The reality of the Revel situation today is that Revel has lost this year alone $75 million. Even in peak summer season, Revel losses $2 million a week and relies on borrowed funds.”
Wells Fargo Makes the Loan
Such facts swayed the judge, who allowed a unit of Wells Fargo to make the loan to Revel Casino. Wells Fargo is one of the casino’s creditors already, so it offered the loan to keep its investment afloat for the time being.
The current funds might not be the full extent of the loan. On July 11, the company will return to court in hopes of increasing the loan to $41.9 million. When it announced its second bankruptcy filing on Thursday, the casino told its employees it would lay off everyone, if the company did not find a buyer by August 18.
Atlantic City’s Troubles
The bankruptcy filing is the latest bad news for Atlantic City. The Atlantic Club went into bankruptcy in 2013 and was bought by rivals Caesars Entertainment and Tropicana on December 23, 2013, in a $23 million sale approved by Gloria Burns.
At the time, Tropicana and Caesars agreed to split the company’s assets and shut down the Atlantic Club. Neither company had an interest in operating the casino. In fact, they were motivated to shut down operations, because the Atlantic Club could have been a rival in the online casino and poker site niche , which had just launched in November 2013. Tropicana took the Atlantic Club’s slot machines and table games, while Caesars collected the real estate and the player database.
11 Remaining Casinos in Atlantic City
The closing of the Atlantic Club reduced the number in Atlantic City to 11. At the time, the closing was seen as an isolated case, since it was the first casino in the city to close due to the 7-year decline in revenues since 2007. Since then, Caesars Entertainment (which owns 4 of those casinos) has suggested it might shut down one or more of its operations in the resort city.
Caesars Entertainment faces $23 billion in debt itself, and in May 2014 shut down Harrah’s Casino in Tunica, Mississippi. Gaming revenues for Atlantic City and the state of New Jersey are already going to decline, due to the loss of the Atlantic Club. Losing one of the Caesars Entertainment casinos and the Revel Casino would be a disaster for the New Jersey gaming industry, and for Atlantic City in particular.
Potential Buyers for Revel Casino
The list of potential buyers is likely to be small. Caesars Entertainment has a history of purchasing such properties, but Caesars CEO Gary Loveman has signaled he wants to lighten his company’s commitment to Atlantic City. MGM Resorts seems more interested in building up its Asian operations, while Donald Trump’s casinos remain a secondary concern for the famous land developer.
A foreign buyer is likely to be the best fit, because one might want to own Revel Casino in order to own a New Jersey gaming license. Amaya Gaming bought PokerStars recently, but PokerStars is committed to Resorts Casino, so it would not seem to be a possibility. As results from online gambling are tallied month-by-month, New Jersey’s experiment with iGaming is seen more and more as a disappointment. In such circumstances, such considerations might have little weight.
