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The Deepest Money Pit Atlantic City Has Ever Seen Re-Opens This Week

Submitted by ckanon@abi.org on
Up the Atlantic City, N.J., boardwalk from the Trump Taj Mahal looms a $2.4 billion monument to grandiose dreams falling to grim realities, Bloomberg reported today. In a place inured to booms and busts, nothing has failed more spectacularly than Revel, the deepest money pit that Atlantic City has ever seen. Initially financed by Morgan Stanley, the immense hotel-casino opened in 2012, with Beyoncé as its headliner. It closed two years later after two trips to bankruptcy court, which is why what is happening now just off Oriental Avenue might seem so surprising. As Atlantic City itself teeters on the financial precipice, once again a brash outsider is promising that Revel will transform the landscape. Florida entrepreneur Glenn Straub wants to turn Revel around, and he’s offered up some pretty wild schemes to do it: a polo club, with the ponies stabled in the parking garage; water parks and rope courses; an indoor ski run; a cryotherapy chamber; a university that he has called a "tower of geniuses" to explore pressing world problems like nuclear waste disposal. The blackjack tables and roulette wheels will come later, he says. A bankruptcy judge let him buy the place, all 6.3 million square feet of it, for $82 million. The idea is to open part of the Revel as early as Wednesday, in what amounts to a soft launch.
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Hastings Entertainment Files for Bankruptcy

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About 500 Amarillo, Texas, employees are facing uncertain times as Hastings Entertainment announced that it has filed for chapter 11 protection while it seeks potential buyers, the Amarillo Globe-News reported yesterday. Stores will remain open through a 30-day period in which the company hopes to find a purchaser. On Friday, the company announced that failure to find a buyer could mean corporate downsizing or closing the entire chain of 126 stores. Hastings is no longer honoring customer deposits for future movie purchases, and existing deposits can be applied toward additional store purchases. Owned by the Marmaduke family for more than 40 years, the company was sold about two years ago for $21.4 million to Draw Another Circle, LLC. Hastings cited declining demand for physical copies of movies, books, music and games as well as elevated pressure from competitors as reasons for the bankruptcy filing.
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Caesars Lawyer Asks Judge to Let Team ‘Finish the Job'

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A lawyer for Caesars Entertainment Operating Co. (CEOC) has asked a bankruptcy judge to halt lawsuits against its parent temporarily so it can complete negotiations with creditors on a consensual reorganization plan, Reuters reported yesterday. The casino group said that it is close to reaching agreement with its diverse creditors on a reorganization plan that includes a $4 billion contribution Caesars Entertainment Corp. This asset is threatened by imminent judgments from lawsuits filed by several hedge funds seeking a total of $11.4 billion. The hedge funds' lawsuits allege that the parent reneged on guarantees on bonds issued by its unit, and Caesars denies the allegations. Rulings against the parent could push it into bankruptcy alongside its unit. An independent examiner concluded in March that Caesars and its private-equity sponsors, Apollo Global Management and TPG Capital, could be on the hook for $5 billion in potential damages from the unit's bankruptcy. Bankruptcy Judge Benjamin Goldgar said he will make a decision at 10 a.m. CDT on Wednesday, a day before the Delaware Chancery Court could enter judgment against the parent on $3.7 billion in claims. A Manhattan judge could rule on another $7.7 billion in claims between June 24 and July 22.
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Days Before ‘Soft Launch,’ No Frenzy to Open Revel

Submitted by ckanon@abi.org on
Five days out from the reopening of the vaunted place formerly known as Revel, and you might imagine there would be a frenzy of activity around the multiblock, Boardwalk-front in Atlantic City, N.J., but no one was scrubbing the exterior of the lavishly designed structure, The Philadelphia Inquirer reported yesterday. The hundreds of huge windows on the building still appear caked with salt and grime, and the metal poles of the light standards ringing the exterior are covered in rust, giving the place a desolate, rather ramshackle appearance. There were no trucks arriving with supplies, nor employees bustling about readying the 900 hotel rooms that are supposed to be available Wednesday when the resort has a "soft" reopening. Instead on Friday, a sparse construction crew tackling the installation of a rope-climbing course and a zip-line ride in the resort's former porte cochere appeared to be the only work happening at the 20-acre site. A lone maid could be seen inside the lobby mopping a section of the marble floor. Glenn Straub, who bought the $2.4 billion resort for pennies on the dollar at a bankruptcy court sale last year, walked around the site with a to-do list in hand still refusing to talk specifics on what the former Revel will be called or precisely what the theme of the resort will be. Although Atlantic City's fortunes as an East Coast gambling mecca have been on a downward spiral for several years, Revel's closure may be its most notorious financial failure to date.
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Apollo, TPG Officials May Pitch In to Caesars Settlement

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Executives at Apollo Global Management and TPG, the owners of Caesars Entertainment Corp., may contribute to a proposed settlement of legal claims tied to Caesars’ bankrupt operating unit, The Wall Street Journal reported yesterday. James Millstein said in bankruptcy court that Apollo co-founder Marc Rowan, Apollo partner David Sambur and TPG co-founder David Bonderman “may make a contribution” to a broader settlement offer by Caesars to resolve allegations that the casino operator and its private-equity owners essentially looted the operating unit of valuable assets for their benefit, harming the now-bankrupt unit’s creditors. Caesars and its owners have denied wrongdoing. Millstein is a turnaround expert who is advising the Caesars unit, known as Caesars Entertainment Operating Co. (CEOC), in its chapter 11 restructuring. He said he doesn’t know whether any potential contribution from the private-equity officials would come through their personal assets or in “their capacity as directors entitled to indemnification from their employers.”
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Caesars Judge Says He May Not Be Able to Halt Creditor Suits

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The judge overseeing the bankruptcy of Caesars Entertainment Corp.’s main operating unit said that he’s not sure he has the power to halt bondholder lawsuits in other courts that could also tip the parent company into chapter 11, Bloomberg reported yesterday. Caesars Entertainment Operating Co., or CEOC, filed for bankruptcy in January 2015. It’s asking for a court order to block parties from taking action in the suits, which target the parent company for actions preceding the unit’s chapter 11 filing. U.S. Bankruptcy Judge A. Benjamin Goldgar said at a hearing yesterday that it may not make any difference if he tells the parties to put the brakes on the litigation, since much of the briefing has been completed. The judges in New York and Delaware appear to have enough information to rule without jury trials, he said. Judge Goldgar also questioned whether he has the authority in this situation to tell another judge not to rule, even though he’s allowed to order the parties to stand down. The bankruptcy is <em>In re Caesars Entertainment Operating Co. Inc.</em>, 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The main Caesars lawsuit is BOKF NA v. Caesars Entertainment Corp., 15-cv-01561, U.S. District Court, Southern District of New York (Manhattan).
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Judge Slows Caesars' Bankruptcy Plan, Warns of Looming Legal War

Submitted by ckanon@abi.org on
A U.S. bankruptcy judge pushed back a decision until later this month on whether to allow the operating unit of Caesars Entertainment Corp. to move forward with a restructuring plan vigorously opposed by some creditors, Reuters reported today. The casino unit has presented a reorganization plan that includes a $4 billion contribution from its nonbankrupt parent to settle allegations of asset-stripping prior to the unit's bankruptcy filing in January 2015. Junior creditors have said the parent could be on the hook for as much $12 billion in claims. Caesars has denied the allegations. A mediation meant to help the feuding camps reach a settlement broke down on Monday. Various groups of creditors said in court on Tuesday that the plan was incomplete, particularly regarding protections from lawsuits it provided to Caesars and its private-equity sponsors, Apollo Global Management and TPG Capital. Negotiations with creditor groups were continuing and they will present a new plan by June 15. A disclosure statement will be presented to the court on June 22, and if approved, the bankrupt unit could begin seeking creditor votes.
 
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Caesars Seeks Fresh Halt to Lawsuits as Mediation Breaks Down

Submitted by ckanon@abi.org on
The bankrupt operating unit of Caesars Entertainment Corp. asked a U.S. bankruptcy judge to block creditors from pursuing litigation against its parent, as talks aimed at resolving the complex case broke down with one group of creditors, Reuters reported yesterday. The possibility of reaching a consensual agreement on a plan to exit bankruptcy looked remote after an independent mediator brought in to broker a settlement between the feuding parties said that restructuring talks between the nonbankrupt parent and junior creditors had reached a deadlock. The Caesars operating unit filed for bankruptcy protection in January 2015 with $18 billion of debt. The parent company has offered $4 billion to help its casino operating unit emerge from chapter 11, but the plan is opposed by junior creditors who accuse the private equity-backed parent of looting the unit of its best assets before the bankruptcy filing. The junior creditors say they have claims worth as much as $12 billion. Caesars has denied the allegations. Bankruptcy Judge Benjamin Goldgar will hold a hearing on the request to halt the New York and Delaware litigation on Wednesday, a day after a hearing on the bankrupt unit's disclosure statement, which describes its plan to exit chapter 11.
 
Get in-depth instructions and advice on effectively using mediation to achieve resolution between debtors and creditors with ABI's Bankruptcy Mediation, available now for pre-ordering.

 

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Trump Taj Mahal Among Atlantic City Casinos Seen at Risk to Shut

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Four additional casinos in Atlantic City, including the Trump Taj Mahal, could shutter if gaming expands in New Jersey beyond the cash-strapped resort town, Bloomberg News reported yesterday. A 10 percent decline in Atlantic City’s gross gaming revenue would put Donald Trump’s namesake casino at risk, according to a Fitch Ratings report released yesterday. Atlantic City, which once had a monopoly on gambling on the East Coast, has been veering toward insolvency since a third of its parlors closed in 2014 amid heightened competition. Its tax base has tumbled by more than two-thirds since 2010. New Jersey Governor Chris Christie last week signed two bills that will pull the 39,000-resident community from the brink of bankruptcy and give it about five months to right its finances. Under the agreement, the state would provide Atlantic City with a bridge loan. Some gambling proceeds that go toward marketing would flow to the city, which would also receive fixed payments from casinos instead of property taxes to prevent the assessment appeals that have strained its finances. The measures will infuse the gambling hub with enough cash to pay bills and workers through October.

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U.S. Lawmakers Oppose Caesars' Casino REIT Plan

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U.S. Congress members urged Treasury Secretary Jacob Lew to deny Caesars Entertainment Corp. a favorable tax ruling relating to the casino operator's plan to create a trust to own its hotels and resorts, saying that doing so would amount to a taxpayer subsidy, Reuters reported yesterday. Lawmakers said in a May 26 letter to Lew that Caesars' plans to reorganize its bankrupt main operating unit into a casino operator and creditor-controlled real estate investment trust (REIT) abuses the unit's original intent of allowing small investors to diversify into real estate. Caesars put the unit into bankruptcy early last year. The proposed REIT spinoff provides favorable tax treatment and such trusts are more highly valued by investors, increasing the recovery for creditors who are owed $18 billion. The company last year applied for what is known as a private letter ruling from the Internal Revenue Service to confirm that the REIT would be treated as a tax-free separation. Caesars has warned that if it fails to get tax-free status it could incur significant liabilities which could undermine the value of the reorganization. "The REIT would effectively shelter a considerable portion of the casinos' profits, thus functioning as a taxpayer-funded subsidy to one of the largest casino companies in the U.S. and its private equity owners," said the letter.

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