Making the News

Philadelphia Inquirer

Originally Published:Thursday, January 10, 2008

It would enhance their economies of scale, and it would give Colony a clear flagship property - one that can compete with the big boys in town," Joe Weinert, senior vice president of consulting firm Spectrum Gaming Group L.L.C., of Linwood, said of Resorts-Colony's acquiring a third casino on the Boardwalk.

"The casino control commission is admittedly on unchartered waters on this situation, and I think there will be many factors in determining which company is successful in acquiring the Tropicana," consultant Weinert said. "The commission is going to look at licensability, the bid price, and also capital-investment plans for the casino.

"Any entity that is licensed by a reputable gaming jurisdiction may have an advantage over an investor that has yet to demonstrate its ability to be licensed," he said.

1st formal bid for troubled casino
The group that owns the Hilton and Resorts in A.C. is offering $850 million for the Tropicana. Others have shown interest.

By Suzette Parmley
Philadelphia Inquirer

The same partnership that owns the Atlantic City Hilton and Resorts Atlantic City casinos yesterday bid $850 million to buy the Tropicana Casino & Resort from the company that lost its state gaming license in December.

The deal would give the partnership of Resorts International Holdings L.L.C., of New York, and Colony Capital Acquisitions L.L.C., of Los Angeles, three properties in Atlantic City, putting it on equal footing with Trump Entertainment Resorts Inc., which also owns three casinos there.

The letter, the first formal offer that has been made for the troubled casino, was sent early yesterday to Tropicana trustee Gary Stein and the New Jersey Casino Control Commission.

The Tropicana has been on the market since Dec. 12, when the casino commission denied former owner Columbia-Sussex Corp. a license renewal.

As part of the offer, Resorts and Colony agreed to invest an additional $100 million for upgrades and to put down a $50 million deposit to guarantee them a 30-day period to complete financing and conduct due diligence, during which other bids would not be considered. Credit Suisse First Boston is identified as the lead financier of the deal.

"It would enhance their economies of scale, and it would give Colony a clear flagship property - one that can compete with the big boys in town," Joe Weinert, senior vice president of consulting firm Spectrum Gaming Group L.L.C., of Linwood, said of Resorts-Colony's acquiring a third casino on the Boardwalk.

The other potential bidders include Mohegan Tribal Gaming Authority, which operates the Mohegan Sun casino in Connecticut, and a partnership between former Tropicana executive Dennis Gomes and Cordish Co., Baltimore, the developer behind the giant Walk outlet mall in Atlantic City. Each has contacted the commission and expressed interest in buying the Tropicana.

In its offer letter, the Resorts-Colony partnership said the fact that it was already operating two casinos in Atlantic City would mean that "the transition to new management would be very efficient with minimal disruption to the current workforce."

In addition, the partnership already has a New Jersey gaming license, unlike Mohegan Sun and the Gomes-Cordish partnership. Gaming industry experts said yesterday that it was not clear that having a license in hand would provide a significant leg up.

"The casino control commission is admittedly on unchartered waters on this situation, and I think there will be many factors in determining which company is successful in acquiring the Tropicana," consultant Weinert said. "The commission is going to look at licensability, the bid price, and also capital-investment plans for the casino.

"Any entity that is licensed by a reputable gaming jurisdiction may have an advantage over an investor that has yet to demonstrate its ability to be licensed," he said.

Dan Heneghan, a spokesman for the state casino control commission, said an out-of-state gaming company that was successful in bidding for the casino would probably apply for an interim casino authorization to allow it to close the deal - just as Columbia-Sussex did in January 2007 when it acquired Aztar Corp. and the Tropicanas in Atlantic City and Las Vegas.

Heneghan said an interim authorization would be issued for a nine-month period, but could be extended three months.

"That should be enough time to complete an investigation and hold a hearing on a new owner's suitability," he said.

As trustee and conservator of the Tropicana, Stein has one main duty: to find a suitable buyer.

On Dec. 12, he was given control of the Tropicana after the commission ruled, 4-1, to deny Columbia-Sussex a license renewal over a series of regulatory violations.

Under the conservator statute, Stein and the commission have 120 days from Dec. 12 - the date of revocation of the former owner's license - to sell the casino.

"I like the Atlantic City marketplace and so does my partner," Colony, Resorts International chief executive officer Nick Ribis said yesterday from New York. "I think it is a stable and strong marketplace.

"That's been our position for the last seven years and continues to be our position," he said. Resorts and Colony bought Resorts Atlantic City on April 5, 2001.

In September 2004, Resorts International, an affiliate of Colony Capital, signed a definitive agreement to buy the Atlantic City Hilton and other casinos from Harrah's Entertainment Inc., after Harrah's acquired Caesars Entertainment Inc.

Last year, Resorts and Colony announced a $1 billion expansion plan for the Atlantic City Hilton. Ribis said that plan was still on the table regardless of whether his firm bought the Tropicana - although somewhat scaled down because of the current credit crunch.

Ribis met early yesterday with Unite Here Local 54 president Robert McDevitt, whose support his company is courting. Local 54 was instrumental in Columbia-Sussex's downfall. The union blamed several hundred layoffs by the company for unsanitary conditions and the loss of business since it took over the casino a year ago.

Last month, the Tropicana employed 3,485, according to the casino commission. In January 2007, it had 4,210 employees.

"We would support any proposal which made economic sense to move the property forward and that would do the right thing for Atlantic City," McDevitt said. "This proposal would do that.

"It's the first proposal we've heard," he said, "and one that's in writing."

Contact staff writer Suzette Parmley at 215-854-2594 or [email protected]
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