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Tropicana Entertainment files bankruptcy6 May 2008
LAS VEGAS, Nevada -- The Tropicana's parent company was working to file for bankruptcy Monday but said the Strip hotel-casino and the company's other properties would continue to operate while it seeks to negotiate with creditors.
Crestview Hills, Ky.-based Tropicana Entertainment said after the markets closed Monday that it would file for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Delaware to allow the company to reorganize its debts. It listed $2.8 billion in assets and $3.3 billion in liabilities.
The gaming company has been struggling to pay off debts, stemming largely from its $2.1 billion buyout of Aztar Corp. in January 2007, amid a downturn in the economy and following the loss of its license to operate the Tropicana Atlantic City.
Company President Scott Butera said the company will continue to pay for operations at its 11 properties in the United States and the Caribbean and keep all 11,000 employees on the payroll.
"It is everybody's interest to make sure the properties are vibrant throughout this," Butera said. "So it is clearly business as usual for customers, employees and vendors.
"It is really a restructuring process between ourselves and our note holders and debt holders. All the people who affect the day-to-day business are going to be paid on time."
The company will use $67 million in financing from Greenwich, Conn.-based Silver Point Finance and the company's current operational cash flow to pay its operating expenses.
The gaming subsidiary of nondebtor Columbia Sussex Corp., which is owned and run by hotelier William Yung III, has working to renegotiate its debt, which includes a $960 million bond, a $1.21 billion senior bank note and a $440 million loan on the 34-acre Tropicana on the Strip, for several months.
"It was inevitable," Wachovia Capital Markets bond analyst Dennis Farrell Jr. said. "Their lenders are looking to stop the erosion of value that's going on within the company and they're trying to get more control of the company, which they will in this process."
Three weeks ago, the company negotiated a deadline extension through April 30 with holders of a $960 million subordinate bond that went into default when the company lost its New Jersey gaming license in December. The loss of its gaming license forced the company to put the Tropicana Atlantic City up for sale.
Tropicana Entertainment was granted a second extension through Monday, but was forced to seek bankruptcy protection later that day when it could not get another extension, according to the court documents.
Butera, a former banker who joined the company in late March, did not know when the company could emerge from bankruptcy.
"The good news is we're in dialogue with everybody, so we're hoping it's an efficient process," Butera said. "It's in everybody's interest to be an efficient process; it's in no one's interest to be a lengthy process."
In court papers, Butera decried the decision by New Jersey regulators to wrest control of the Atlantic City Tropicana from the company, saying that led directly to the bankruptcy filing. He laid out a series of problems that befell Tropicana's owners from almost the moment they took over the property on Jan. 3, 2007.
When it bought Aztar Corp. for $2.1 billion after a heated bidding war, the company unwittingly violated a fundamental principle of business: buying high just before the market fell.
Using tactics they had successfully employed elsewhere, management began cost-cutting measures, including nearly 1,000 layoffs in Atlantic City, prompting an uproar from unions. A slowing national economy made gamblers more cautious about parting with their money, and real estate values plummeted as well. Then credit markets tightened, leaving Tropicana Entertainment "very little margin for error," Butera wrote in court filings.
The company simply could not afford any significant setbacks, he added.
Nine of the of the company's 11 properties are in the bankruptcy filing, including the Tropicana on the Strip, the Horizon and the MontBleu in Lake Tahoe, and the Tropicana Express and River Palms in Laughlin.
The Westin on Flamingo Road is owned by a separate subsidiary of Columbia Sussex and is not affected by the bankruptcy.
The Tropicana Atlantic City, which is operated by New Jersey officials pending its sale, and a Mississippi property it co-owns are not part of the filing, according to court documents.
The company announced in March it had reached an agreement on the $245 million sale of the Casino Aztar in Evansville, Ind. That sale, along with the pending sale in Atlantic City and the sale of a casino in Vicksburg, Miss., could generate between $982 million and $1.34 billion, according to analysts.
"We're still moving forward with those sales and they will be part of the bankruptcy process," Butera said. "It should not have any significant impact but there may be some timing considerations."
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