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Gaming Guru

Arnold M. Knightly
 

Tropicana execs will face regulators

28 July 2008

CARSON CITY, Nevada -- Tropicana Entertainment executives will go before state gaming regulators next month to discuss issues related to the company's pending bankruptcy settlement and restructuring, the company said Friday.

The Aug. 6 hearing in Carson City before the state Gaming Control Board is not a suitability hearing for company owner and licensee Bill Yung III, who has been under investigation by gaming regulators since last summer.

"This is more of a general update as to what changes have been made in regards to our structure, what changes have been made in regards to Bill Yung's involvement," said Scott Butera, company president and chief executive officer.

Yung, who has not been asked to appear for the hearing, owns five casinos in Nevada, including the Tropicana on the Strip, through Tropicana Entertainment.

He also owns and operates a sixth, The Westin on Flamingo Road, which is held outside his gaming company.

Yung ran the Crestview Hills, Ky.-based gaming company as president and chief executive officer in 2007 and was the company's sole director.

The embattled hotelier has slowly relinquished operational control of the company because of increasing pressure from bondholders who believe he is largely responsible for the regulatory and financial problems facing the company.

Butera, a former Wall Street banker who helped restructure Trump Hotels & Casino Resorts, took over as Tropicana Entertainment president in March, and CEO at the end of June.

In July, Yung also stepped down as director as part of a proposed bankruptcy settlement with debt holders.

Tropicana Entertainment filed Chapter 11 bankruptcy in Delaware in May after the company defaulted on nearly $2.7 billion worth of bonds after losing its license in December to operate the Tropicana Atlantic City, the company's largest revenue and cash flow generator.

A New Jersey appellate court denied an attempt by the restructured company to regain control of the property.

The Tropicana Atlantic City is being operated by a trustee while bids are being accepted for its possible sale.

News of the regulatory hearing comes the same week the company released its 2007 financial report to the federal government, nearly four months late.

The gaming company posted a loss of $1.02 billion, driven by write-downs associated with the $2.1 billion buyout of Aztar Corp. in January 2007 and a loss from discontinued operations in Atlantic City and Evansville, Ind.

However, with the company in bankruptcy, the financial report has no effect on the company's bond ratings.

Net revenue of $512.5 million covering nine properties across the United States, excluding New Jersey and Indiana, were reported for 2007.

Butera acknowledged that revenues were not as good as the company had hoped. However, the results are similar to what other gaming operators are facing across the country in the slowing economy.

"In some markets, our customers are in the middle market and they have been the ones most hurt by gas prices, food prices," Butera said.

The company posted an income loss of $413.6 million because of $275.7 million in write-downs from the buyout and a $302.1 million interest expense.

An additional $610.6 million in asset write-downs were reported because of discontinued operations at the Tropicana Atlantic City and Casino Aztar Evansville.

Both properties are being operated by trustees pending their possible sale.

The company has to report the estimated value of the properties as "a loss from discontinued operations," according to federal accounting practices.

Barbara Cappaert, a KDP Investment Advisors bond analyst, said in an investor's note that the company's poor performance was not a surprise.

The numbers reflected the "lack of attention on operations as management was undergoing the distractions of losing its Atlantic City operations," Cappaert wrote.

Locally, the Tropicana on the Strip posted revenues of $156.8 million while generating a cash flow of $43.4 million.

The revenue numbers are a 4 percent decrease from 2005, the last full year of numbers reported by Aztar.

The property's cash flow increased 11.3 percent from $39 million in 2005.

Cash flow, defined as earnings before interest, taxes, depreciation and amortization, also decreased across the company.

Tropicana execs will face regulators is republished from Online.CasinoCity.com.