Tuesday May 6, 09:52 AM
Tropicana casino group files for bankruptcy
By Steve Friess
LAS VEGAS, United States (AFP) - The owner of Tropicana Las Vegas Hotel and Casino (Paris: FR0000125585 - news) filed for bankruptcy but promised to keep the roulette wheels cranking and the showgirls vamping while courts decide the company's fate.
Tropicana Entertainment LLC, owner of 13 casinos with 11,000 employees in five states including the resort in Las Vegas, blamed its inability to cover its debts on its license problems in Atlantic City, New Jersey.
A significant downturn in tourism, a drop in real estate values and a tightening of the credit market that made acquiring more debt impossible were also cited for the filing Monday.
"We ran into a perfect storm," Tropicana spokesman Hud Englehart told AFP.
The most serious problem was the decision of the New Jersey Casino Control Commission on December 12 to revoke the company's license to run its Atlantic City casino after less than one year.
A state judge is overseeing the sale of Tropicana Atlantic City, which must be completed by June 9.
President Scott Butera complained in the filing Monday in US Bankruptcy Court in Delaware that the move is devaluing the assets by forcing a court sale to occur "in an artificially constrained timeframe into the teeth of an extremely inhospitable real estate market."
According to the filing, the company has 3.3 billion dollars in debt and 2.8 billion in assets. It brought in 1.0 billion dollars in revenues last year.
The company's crisis began in January 2007 when, as Wimar Tahoe Corp., it purchased Aztar Corp. -- owners of five casinos including the Tropicana in Las Vegas and Atlantic City -- for 2.1 billion. The corporate name was changed following that purchase.
"The Aztar acquisition was the result of an intensely competitive bidding process, with a purchase price that, in retrospect, represents the height of the real estate market and was consummated just prior to that market's precipitous decline," Butera said in the bankruptcy filing.
"As a result of the Aztar acquisition financing, the debtors became significantly but not inordinately leveraged, which would have been quite manageable had market forces not quickly changed."
Gaming revenues in Atlantic City were down 9.6 percent in 2007 from 2006, the New Jersey Casino Control Commission reported.
The decline came amid a national economic downturn that has reduced the public's appetite for travel and leisure spending.
Monday's filing only covers nine of the Kentucky-based operator's casinos, including its 34-acre resort in Las Vegas.
The Tropicana in New Jersey isn't included because it is in state custody and two casinos, the Amelia Belle Casino in Louisiana and the Westin Casaurina in Las Vegas, are owned by a corporate affiliate, Columbia Sussex.
The bankruptcy filing puts the fate of the company's most valuable asset, the Tropicana Las Vegas, in question.
Land on the Las Vegas Strip in recent years has been sold for as much as 35 million an acre, meaning the real estate holdings alone in Las Vegas could be worth more than one billion.
MGM Mirage (NYSE: MGM - news) , the casino conglomerate which owns Las Vegas' MGM Grand, New York-New York and Excalibur, has not examined whether it would want to buy the Tropicana if it becomes available, MGM Mirage spokesman Alan Feldman said.
"Although we always evaluate opportunities in our core markets, we have not considered this," Feldman said.
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