Vol. 5, No. 5, May 2008
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Tropicana Gets A Lifeline
With days to spare, onetime Atlantic City casino operator Tropicana Entertainment negotiated an extension giving it “significant” extra time to pay off $960 million in outstanding bonds. The bonds went into default last December when the company lost its New Jersey gaming license, forcing it to sell the Tropicana Casino Hotel.
A relieved company President Scott Butera, who came on board in March to guide the embattled company through recapitalization, said, “We’ve bought ourselves time to hopefully negotiate … with our note holders.”
Without the extension, bondholders could have demanded immediate payment of the $960 million, which could have forced the company into bankruptcy. Tropicana’s parent company, Columbia Sussex, carries a total of $2.7 billion in debt, largely due to its January 2007 takeover of Aztar Corp., former owner of Tropicana Entertainment. At the time, CEO William Yung III planned to make his casinos more profitable by cutting costs. “Our company is very motivated by the bottom line,” he said at the time.
In Atlantic City, that plan proved disastrous. After massive layoffs that led to substandard conditions at the casino hotel, the company was deemed unfit to operate and lost its license. It planned to repay its senior debt with proceeds of the sale of the Trop and other assets; Eldorado Resorts recently offered $245 million for Casino Aztar in Evansville, Indiana.
But nervous bondholders were not satisfied. Concerned that the company had insufficient collateral to cover the debt, they pressed for immediate repayment or a default judgment.
Both the Atlantic City and Evansville properties are now under the control of state-appointed trustees, pending sale. Acknowledged bidders for the Atlantic City property include Colony Capital LLC, owner of Resorts and the Hilton, a private New York investment firm led by Joseph Palladino, and Gomes+Cordish, an alliance of former Trop President Dennis Gomes and the Cordish Company, a Baltimore development firm. A sale is expected by summer.
