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Arnold M. Knightly

Columbia Sussex fights back

5 March 2008

NEW JERSEY –- Columbia Sussex Corp. is not leaving New Jersey without a fight.

The Fort Mitchell, Ky.-based operator filed a 62-page brief with the New Jersey appellate court Tuesday asking that the New Jersey Casino Control Commission's Dec. 12 decision to not renew the company's gaming license to operate the Tropicana Atlantic City be overturned.

The brief accuses the commission of abusing its regulatory discretion and of not remaining neutral during the licensing hearings.

Columbia Sussex spokesman Hud Englehart declined further comment.

Commission spokesman Dan Heneghan said Columbia Sussex was expected to contest the decision and regulators will respond by the April 4 deadline.

"This brief was just filed today so the commission has not had the opportunity to review it yet," Heneghan said. "When it does, the commission will file its response."

The brief alleges the commission ignored facts about the company's financial stability and business operations.

New Jersey gaming authorities denied the license after deciding the company failed to meet the state's strict licensing requirements. Commissioners said the company showed "a lack of business ability, a lack of financial responsibility and lack of good character, honesty and integrity."

Columbia Sussex said the regulators gave "unwarranted credence to severely overstated customer complaints" and gave no weight to the property's 94 percent occupancy rates.

According to the brief, the property received just 71 complaints from registered customers in a period covering 369,000 room nights.

The company also invested $30 million in improvements to the property in its 11 months of ownership.

The brief also said the commission rejected the license because of complaints about the Tropicana's audit committee structure even though the regulators had previously approved the structure.

The appeal comes while a New Jersey conservator is proceeding with the property's sale to another owner.

Investment bank Bear Stearns, which is assisting former New Jersey State Supreme Court Justice Gary Stein with the sale, has begun contacting parties that have expressed an interest in purchasing the 2,100-room hotel-casino.

Stein wants to complete the sale by the end of April with a closing by the end of June.

Wachovia Capital Markets gaming analyst Dennis Farrell Jr. said the most "advantageous outcome" for Columbia Sussex would be if the sale didn't happen "due to the fact that they would not be forced to sell an asset in a difficult credit market which could impact the valuation of the sale."

Englehart declined to speculate on how the appeal could affect the sale.

The Tropicana, which is now operating under state control, has started rehiring some of the laid-off workers and has launched a campaign to repair its image.

The brief comes while Columbia Sussex is dealing with a Feb. 29 ruling in Delaware Chancery Court that was considered a win for the company's bond and high-yield debt holders.

The court declared an "event of default" and Columbia Sussex principal owner William Jung III has until the end of the month to negotiate new terms with bond and high-yield debt holders or he could be forced to restructure the company.