Creditors Take Over Resorts Casino
By WAYNE PARRY
Updated 5:14 AM EST, Fri, Nov 20, 2009
America's first casino to open outside Nevada got permission Thursday to hand itself over to its lenders because it can't pay the mortgage.
Resorts Atlantic City hammered out a deal with its lenders to let them own the casino in return for canceling nearly $381 million in debt. The lenders, including Wells Fargo, have formed a new corporation called RAC Atlantic City Holdings LLC, which was approved by the state Casino Control Commission as the casino's new owner with a one-year license.
The deal, the first of its kind in Atlantic City's 31-year history of casino gambling, would close in 10 days.
On Wednesday, Resorts, whose gross operating profit fell nearly 80 percent in the third quarter of this year, revealed it owes nearly $337 million more than it has.
Under the deal approved Thursday, former owner Colony Capital LLC gave up its interest in the casino to co-owner Nicholas Ribis, who will manage the casino and continue to own the gambling equipment inside it.
"It's a good partnership between myself and the bank," Ribis said. "We're going to make this property better than it is now, I promise you that."
Ribis said he may offer to buy the casino from the bank in the coming year.
"I love Resorts," he said, "and I intend to stay at Resorts as long as possible."
Resorts opened in 1978, ushering in the casino gambling era in Atlantic City. But in recent years, it has become dwarfed by newer, bigger casinos around it. It also was hurt when slots parlors in neighboring Pennsylvania began siphoning off its most loyal customers, mainly day-tripping senior citizens who would ride the bus to play slots for a few hours.
By last fall, the nationwide recession had pushed Resorts to the brink, leaving the casino unable to make payments on a $360 million mortgage, which has swelled.
Resorts last made a payment on that mortgage in October 2008. Its lenders, including Wells Fargo on behalf of Credit Suisse First Boston Mortgage Securities Corp., could have foreclosed on it but chose to work out the deal that was approved Thursday.
The casino commission shortened Resorts' existing license, which runs through 2013, to a one-year license and mandated that it keep at least $15 million in cash on hand at all times.
"At present, the lenders are the best, and in all likelihood, the only source of funding for the property at a crucial time," commission Chairwoman Linda Kassekert said.
Peter Hoelzle, president of the newly formed RAC Atlantic City Holdings, said the company will provide an $8 million cash infusion.
He said the agreement will help save the jobs of Resorts' nearly 2,200 employees. He also said the company intends to find a buyer as quickly as possible.
"We have no intention of operating the casino or the hotel well into the future," he said.
Copyright Associated Press
First Published: Nov 19, 2009 5:34 PM EST
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