Bankruptcy a good thing? That’s the view of Revel’s CEO after the Atlantic City casino resort plans to file Chapter 11 bankruptcy protection in late March, less than a year after opening.
The voluntary, pre-packaged bankruptcy will wipe away about two-thirds of Revel’s $1.5 billion in 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 said. “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.”
Existing management will remain in place, no layoffs are planned, and employees and vendors will be paid as usual, the company said. The restructuring should be completed by early summer, it added.
The $2.4 billion casino never caught on as much as it had expected to, and it remained mired toward the bottom of Atlantic City’s 12 casinos in terms of casino revenue. Revel had to line up two rounds of additional financing since August to keep operating.
In January, it posted its second-worst month, winning less than $8 million from gamblers. During the second and third quarters of last year, it 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 remained stuck in neutral. DeSanctis said the company and its lenders decided that a prepackaged Chapter 11 would be the best way to improve its balance sheet by eliminating substantial debt and increasing the changes for growth.
It is the latest in a series of recent bankruptcies involving Atlantic City casinos. Trump Entertainment Resorts emerged in 2010 from the third Chapter 11 bankruptcy that it or its corporate predecessors had filed, and the Tropicana Casino and Resort was sold that same year out of bankruptcy court to billionaire Carl Icahn.
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; it only said “a majority” of its lenders have agreed.
Michael Garrity, Revel’s chief investment officer, said carrying less debt will help Revel operate.
“The reduction of debt service expense this agreement facilitates will greatly improve Revel’s cash flow to better support day-to-day operations,” he said.
Both he and DeSanctis said they are optimistic about Revel’s prognosis heading into its second summer.
Revel opened in April as a potential game-changer, the first new casino built in Atlantic City since the Borgata Hotel Casino & Spa opened in 2003.
Contact us at [email protected].