Wednesday February 20,2013 : ATLANTIC CITY'S NEWEST LAND CASINO IN FINANCIAL STRAITS
Revel to file for Chapter 11 bankruptcy
Less than a year ago New Jersey gambling industry observers were hoping that the launch of the new Revel land casino would revitalise Atlantic City's ailing land gambling industry, but this week the operation announced that it has applied for Chapter 11 bankruptcy late next month.
The voluntary move is designed to wipe away about two-thirds of Revel's $1.5 billion debt by converting more than $1 billion of it into equity for lenders.
Kevin DeSanctis, Revel's CEO, said the restructuring will give the casino resort more flexibility to operate.
"Today's announcement is a positive step for Revel," DeSanctis told the Associated Press news agency. "The agreement we have reached with our lenders will ensure that the hundreds of thousands of guests who visit Revel every year will continue to enjoy a signature Revel experience in our world-class facility."
The positive news is that existing management will remain in place, no layoffs are planned, and employees and vendors will be paid as usual, the company said.
After struggling for most of its brief existence, which included seeking two further rounds of financing, the $2.4 billion enterprise failed to make the Atlantic City impact most hoped it would as the region struggled against the economic climate and growing competition from neighbouring states.
Losses mounted, and during the second and third quarters of last year, the enterprise reported gross operating losses of $35 million and $37 million.
Revel officials have been reviewing their options in recent months as the Atlantic City market continued to decline and its own revenues languished. DeSanctis told Associated Press that the company and its lenders decided that a pre-packaged Chapter 11 would be the best way to improve its balance sheet by eliminating substantial debt and increasing the chances for growth.
As part of the restructuring, some of Revel's lenders will provide approximately $250 million in debtor-in-possession financing, about $45 million of which constitutes new money commitments and approximately $205 million of which is pre-petition debt. No taxpayer funds will be used to finance the restructuring, the casino said.
The company didn't identify which lenders will be part of the filing; revealing only that "a majority" of its lenders have agreed.