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Arnold M. Knightly

Trop owner buys time

16 April 2008

LAS VEGAS, Nevada -- The owner of the Tropicana has negotiated a "significant" deadline extension with various note holders while the company fights to keep itself out of bankruptcy.

Tropicana Entertainment President Scott Butera said Tuesday that an extension to a Sunday deadline has been negotiated with holders of a $960 million subordinate bond that went into default when the company lost its New Jersey gaming license in December.

Without the extension, the bond holders, who were worried that the company did not have enough collateral to cover their debt, could have demanded immediate payment on Sunday, possibly forcing the company into Chapter 11 bankruptcy.

"We've bought ourselves some time because we're in what I think are very productive conversations," Butera said. "We've bought ourselves time to hopefully negotiate recapitalization with our note holders."

Columbia Sussex carries about $2.7 billion in debt, largely stemming from its January 2007 takeover of Aztar Corp. The Crestview Hills, Ky.-based company has been trying to restructure its debt since losing its gaming license in New Jersey and being forced to put the Tropicana Atlantic City up for sale.

In addition to the $960 million bond, the company holds a $1.34 billion senior bank note and a $440 loan on the 34-acre Tropicana on the Strip. The Las Vegas property is not serving as collateral for either of the debts, although Butera said a default on either of the other two loans could trigger a default on the Strip property.

The company had made some progress on restructuring its debt load before getting the extension.

The company announced last month that 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 an April 1 investor note from KDP Investment Advisors bond analyst Barbara Cappaert.

The money would satisfy most of the senior bank note but would still leave the $960 million bond holders concerned that not enough collateral is left to support the bond debt unless the Strip site is held as collateral.

"Given that the excess value inherent in this property is attractive to bondholders, we think that (Tropicana Las Vegas) will become part of any restructuring," Cappaert wrote on April 1.

The extension's length will be disclosed in a filing with the Securities and Exchange Commission as early as today, Butera said.

Bond analysts have increasingly been speculating that Tropicana Entertainment could be forced into bankruptcy since New Jersey took away the company's gaming license.

New York-based Moody's Investor Service downgraded the company's bond ratings April 7 to reflect "the greater probability the company will be unable to cure a technical default" on the $960 million.

The Atlantic City property is being operated by the New Jersey officials until it can be sold, possibly by the end of June.

"That scenario (the pending deadline) some say would likely accelerate Tropicana's fall into bankruptcy and secure an ownership advantage to the bondholders," Gerald Magpily wrote Monday on the venture capital industry Web site

"Tropicana's rating remains on review for further downgrade given the number of near-term events that could trigger a default, a distressed debt exchange, or bankruptcy filing," the Moody's note read.

Butera, however, said the extension agreement means the threat of bankruptcy is probably "not something that's out there right now."

"We're in negotiations and how those will unfold has yet to be determined," said Butera, who was hired in late March to help guide the company through a recapitalization process. "We are in active daily discussions and everyone would like this to move quickly."

The company has told the Securities and Exchange Commission that it would be late filing its fourth-quarter and year-end earnings report because of the continuing financial problems.