Staff & Wire Reports | New Jersey’s highest court this upheld a decision by casino regulators to revoke the license of the former owner of the Tropicana, removing a major obstacle in the way of the casino’s sale.
The New Jersey Supreme Court issued no opinion, but affirmed the decision of the Appellate Division when it ruled in favor of the Casino Control Commission, which took the unusual step last December of voting, 4-1, to deny a casino license to Kentucky businessman William Yung.
Paul O’Gara, who represented Yung’s company in its licensing hearing, said the state Supreme Court "made its decision, and we’ll move on."
Tropicana lawyers had argued in part that a letter sent to the commission from state Senator Richard Codey on behalf of a large Atlantic City union improperly influenced the commission.
But commission chairwoman Linda Kassekert said the court’s ruling "reinforces our position the decision was clearly based on the record developed before us and not any external factors."
Kassekert said the decision also "clears the way to reactivate the process of finding a new owner for the casino hotel."
Yung, a hotelier, came out of nowhere three years ago when he embarked in a bidding war with Dan Lee, Pinnacle Entertainment’s chief executive, for control of Aztar, which owned the Tropicana casinos in Las Vegas and A.C., its flagship, along with a handful of small gambling parlors and a prime piece of land on the Las Vegas Strip. Yung borrowed heavily for the $2.8 billion he paid for the company.
But Yung had an extreme cost-cutting philosophy casino regulators said ultimately hurt Tropicana’s business. In their decision, the commission also questioned the business acumen and casino experience of Yung’s company, and cited its "defiance of the regulatory process" when it revoked his license.
After its Dec. 12, ruling, the commission appointed a conservator, retired New Jersey Supreme Court Justice Gary Stein, to sell the Tropicana. Its parent company, Tropicana Entertainment, was then forced to file for Chapter 11 bankruptcy protection and later ousted Yung.
Stein was faced with trying to sell a casino at a time when A.C. was taking a beating from competition and the economy. And the credit crisis meant no banks were willing to lend money for the deal.
After two rounds of bids, the Cordish Co., a Baltimore developer, emerged as the lead bidder, offering $575 million in cash or $700 million in cash and notes for a casino once thought to be worth close to $1 billion.
The sale stalled, however, while both sides awaited the state Supreme Court’s decision. Meanwhile, consultants and lawyers have racked up $3.2 million in fees related to the Tropicana’s sale and operations. And the Tropicana’s business has suffered.
Stein is now expected to ask a U.S. Bankruptcy Court judge to hold an auction for the Tropicana so the sale can be made free and clear. Cordish’s bid will provide a base price.
But the fight for the Tropicana is not yet over. Bondholders are supporting new management of Tropicana Entertainment, which has asked the commission to transfer the A.C. casino back to it. The company argues it is different and managed better now that Yung is out.
Casino regulators have not yet taken up the petition. And bank lenders do not support it.
Meanwhile, some wonder if the Tropicana can be sold at all. Last week, a Nevada company backed out of a deal to buy another Tropicana Entertainment casino in Indiana because it could not obtain financing.