Tropicana Entertainment announced a deal with lenders last Friday to keep the company out of bankruptcy until it can sell the Atlantic City casino, which has attracted another possible buyer, the Mohegan tribe of Connecticut.
The deal keeps Tropicana Entertainment from defaulting on the terms of a $1.3 billion bank loan for as long as one year. The company was owner and operator of the Tropicana Casino and Resort until state gaming regulators denied it a license Dec. 12.
Now a trustee for the casino must identify a new owner.
The Mohegan Tribal Gaming Authority, the agency that operates the $1-billion-per-year Mohegan Sun Casino, has indicated it may want to add the Tropicana to its balance sheet.
Jeffrey Hartmann, the authority’s chief operating officer, said he’s been in contact with Linda Kassekert, chair of the New Jersey Casino Control Commission, about the casino.
"I think our brand is well-established with many of the customers that visit Atlantic City today," Hartmann told the Press of Atlantic City. "We like the regulated environment, and I think we can be a good addition to the Atlantic City market."
Mohegan executives have been studying Atlantic City as part of its growth potential on the East Coast, a Mohegan executive told The Press of Atlantic City.
Second in size to Foxwoods casino in Connecticut, The Mohegan Sun Casino is undergoing a major expansion plan costing about $925 million.
"The property generates a lot of cash flow," said Dennis M. Farrell Jr., a gaming analyst for Wachovia Capital Markets. "It can be a strong strategic move to diversify that cash flow."
Among the other operators to show interest in the Tropicana is David Cordish, chairman of the Baltimore-based Cordish Co., which created The Walk.
A formal application process for buyers is being devised, the Casino Control Commission said.
Tropicana Entertainment, an affiliate of Columbia Sussex Corp. in Kentucky, lost its license after weeks of negative publicity, meaning it cannot own or operate the casino.
Under the leadership of CEO William J. Yung III, the company laid off about 900 employees, or almost a quarter of the casino’s work force. In hearings with the commission, customer complaints surfaced about dirty rooms and inadequate service, which casino officials said were fixed.
The commission also fined the casino $750,000 for failing to install an independent auditing committee as required under the Casino Control Act.
Since then, Gary S. Stein, a former New Jersey Supreme Court justice, has been serving as trustee and conservator of the Tropicana. He oversees the casino hotel’s operations and must find an appropriate buyer to be approved by the commission in 120 days, unless an extension is needed.
When a sale does occur, Columbia Sussex will receive no profit. It will get either the current market value or the price it paid for the casino, whichever is less,. Anything left over will funnel into a state fund to aid senior citizens and the disabled.
Columbia Sussex’s bank debt helped finance the $2.75 billion needed to buy the Tropicana property in Atlantic City in January, along with purchasing the Tropicana in Las Vegas and the Casino Aztar in Evansville, Indiania.
Without a license, Tropicana Entertainment could have been ordered to pay back its loan to lenders almost immediately.
The company announced earlier this week that it will use the proceeds from the sale of Tropicana in Atlantic City, as well as the sale of Casino Aztar and the Horizon Vicksburg Casino in Vicksburg, Mississippi, to pay off debt.
"We are pleased to have reached an accommodation with our senior lenders and the trustee overseeing the Tropicana Atlantic City so that we can proceed with the orderly sale of our properties in Atlantic City, Evansville and Vicksburg, retire our senior credit facility and position our company for long-term growth," William J. Yung III, president and CEO of Tropicana Entertainment, said in a statement Friday.