Financier Icahn may offer to buy Tropicana casino

Feb 19, 2009 12:00 AM
Staff & Wire Reports |

Billionaire financier Carl Icahn may be rolling the dice again on an Atlantic City casino.

The former owner of the now defunct Sands Casino Hotel is among parties who may offer to buy the troubled Tropicana Casino and Resort once it's offered in a bankruptcy auction.

Attorney Gilbert Brooks, representing Icahn and other secured lenders who hold a $1.4 billion mortgage on the casino-hotel, says Icahn and others are willing to make an offer as a so-called stalking horse. That involves making a minimum offer in a bankruptcy court auction that other bidders can then exceed; if no one else bids, the stalking horse gets the property.

The state Casino Control Commission, which licenses and regulates the industry, had been expected to authorize a sale Wednesday. But because a potential offer from the lenders appeared close to materializing, the deadline was put off for a month.

A bankruptcy auction likely will be authorized March 18.

The Tropicana has been overseen by a state-appointed conservator since December 2007, when its former owners were stripped of their casino license after nearly 1,000 layoffs led to problems with cleanliness, service and compliance with state gambling regulations.

The conservator, Gary Stein, a retired state Supreme Court justice, had tabbed Baltimore-based Cordish Co. as a potential buyer for the Tropicana in a bankruptcy court auction.

But the two sides still have not reached a deal that would be acceptable to the senior lenders, who could block it in court.

Stein attorney Sean Mack said the company's chairman, David Cordish, remains interested in the Tropicana. Last year, Cordish offered $700 million for it, but that offer has been reduced because of the economic meltdown.

"He's still very interested and is still willing and considering increasing his offer," Mack said Wednesday.

The new amount Cordish is willing to pay for the casino hasn't been disclosed.

Brooks said if Icahn and other lenders including the Greenwich, Conn.-based hedge fund Silver Point Capital LP do make a stalking-horse offer in a bankruptcy auction, they would welcome higher bids from Cordish or anyone else.

A union representing more than 800 Tropicana casino dealers and other workers filed an unfair labor practices charge Tuesday against Stein, alleging he has failed to bargain in good faith while pursuing a sale.

"We believe that by resolving this labor dispute, the Tropicana will be a much more attractive property," the United Auto Workers union said in a statement. "But in order to do this, we need a negotiating partner that will work with us to reach a fair and equitable agreement."

The union won representation elections at four Atlantic City casinos over the past two years but has yet to sign a contract with any of them.

Stein declined through his attorney to comment on the union's complaint.

About two dozen Tropicana slots technicians have authorized a strike if a deal cannot be reached soon.

Later Wednesday, the casino commission was to hear a request from a lender seeking to foreclose on New Jersey's first casino, the Resorts Atlantic City, which hasn't made loan payments since October.

Column Financial Inc., a commercial mortgage subsidiary of Credit Suisse, asked the commission last month to let it foreclose on the casino.

Failing that, Column Financial wants the Colony Capital LLC affiliates that own the casino to hand over title to the property. Column would keep the casino open while searching for someone to run it.

Resorts was the first casino outside Las Vegas when it opened in May 1978. But it has an older clientele that spends — and loses — less money than younger crowds that prefer newer casinos such as the Borgata Hotel Casino & Spa.

Resorts took in $233.2 million in 2008. The only Atlantic City casino that did worse was Trump Marina Hotel Casino, which is being sold. In contrast, the Borgata's revenues were $738.7 million.

Atlantic City is struggling not only with the nationwide recession, which leaves gamblers with less money to risk, but also with competition from new slots parlors in Pennsylvania and New York. The casino commission said recently that 10 of Atlantic City's 11 casinos were shedding jobs at an alarming pace.

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