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Gaming Guru

Arnold M. Knightly
 

Tropicana officials calm fears in wake of bankruptcy filing

7 May 2008

LAS VEGAS, Nevada -- When the Tropicana opened 51 years ago, it was dubbed the 'Tiffany of the Strip.'

With its luster long gone and now overshadowed by more modern facilities, the well-worn property now has to struggle with its latest challenge: the bankruptcy of its owner.

Tropicana Entertainment filed for Chapter 11 bankruptcy court protection late Monday so the company could reorganize its debts while continuing day-to-day operations at its 11 properties.

While the company's attorneys were busy arguing first-day motions in U.S. Bankruptcy Court in Delaware on Tuesday, 2,500 miles away, the Strip property's management team was on the phone reassuring employees, customers and vendors the property was continuing business as usual.

"I know the 'B' word sometimes scares a few people," said John Sevilla, general manager of the Tropicana. "This is really a good thing for us. We are doing this from a position of strength, and it will be business as usual."

The phone calls began Monday afternoon with news of the bankruptcy filing, Sevilla said. The company made courtesy calls to Las Vegas Mayor Oscar Goodman, the Las Vegas Convention and Visitors Authority, the Las Vegas Chamber of Commerce and other organizations to inform them of the pending filing.

Tuesday was spent fielding calls from employees wondering if their jobs had changed and from customers wondering whether their rooms were still available.

Sevilla said he spent most of the morning talking to vendors to ensure deliveries and supplies continued to flow to the property.

The bankruptcy filing had been discussed within Tropicana Entertainment since New Jersey gaming regulators took away its gaming license, forcing the sale of the Tropicana Atlantic City.

However, Sevilla said bankruptcy was not discussed with the property's 1,700 employees prior to Tuesday because the company did not have a firm idea of when it might happen.

"It was not something we had told our employees about because we didn't want to scare our employees," Sevilla said. "We are making ourselves available to make sure to answer any questions they have with the restructuring."

On Tuesday, a company manager was available in the employee dining room to answer questions, Sevilla said.

Culinary Workers Union Secretary-Treasurer D. Taylor said labor representatives had discussed the possibility of a bankruptcy filing with the nearly 750 members of Culinary Local 226 and Bartenders Local 165 who work at the property.

"We had already contacted workers two or three weeks ago," Taylor said. "We saw this coming. It's really no different than what's been going on there now."

Taylor said that while the bankruptcy might make workers nervous, the union kept its members informed about what their rights are during a restructuring.

However, negotiations between the property and the Culinary union scheduled for Tuesday were postponed by the property hours before the sides were scheduled to meet.

The hotel-casino has been without a new Culinary contract since May 31. Nearly 750 workers have been working on extended agreements.

Tropicana officials and analysts point to the positive cash flow generated from various properties still in the company's portfolio as key to the company's ability to successfully exit bankruptcy.

Company cash flow, combined with $67 million in bank financing secured for the bankruptcy, will be enough to pay for normal daily operations, KDP Investment Advisors bond analyst Barbara Cappaert said in a note to investors Tuesday.

Company cash flow, defined as earnings before interest, taxes, depreciation and amortization, was $227.7 million for the first nine months last year. The Strip property contributed $32.6 million to cash flow, according to a December filing with the Securities and Exchange Commission.

Tropicana Entertainment postponed releasing its 2007 earnings report in March and has yet to release any numbers.

Tropicana Entertainment has been struggling to pay off debts incurred largely from the $2.1 billion buyout of the Aztar Corp. in January 2007.

A $960 million subordinate bond scheduled to mature in late 2014 went into default when the company lost its New Jersey gaming license in December.

The bond holders worried that the company did not have enough collateral to cover its debt.

Sevilla said the next few days are important for the property and the company.

"We hope people don't shy away from coming out here because it is business as usual," Sevilla said.