Revel AC Inc. announced on Monday that it has officially filed for Chapter 11 bankruptcy.
A Revel spokesperson claims that the move will reduce the company’s debt by more than 82% from 1.52 billion to $272 million through a debt-for-equity conversion. The spokesperson also says the move isn’t expected to impact Revel’s guests, employees or vendors.
“Backed by overwhelming lender support, we remain on track to complete our financial restructuring ahead of the critical summer season,” said Jeffrey Hartmann, Revel’s Interim Chief Executive Officer. “We will emerge from this recapitalization positioned for long-term success, with the financial capacity to pursue our amenity enhancement opportunities, and the ability to continue providing our guests with a signature Revel experience.”
The company expects to complete its restructuring within 45 to 60 days and expects to emerge from Chapter 11 by early summer.
Earlier in the month, Kevin DeSanctis, the man who guided the casino-hotel through its development, stepped down as head of the resort. Chief investment officer Michael Garrity also resigned from his position. While both men stepped down from their positions with Revel Atlantic City, they retained their jobs with Revel Group, the holding company that developed the resort and licenses its brand. Hartmann took over the resort’s day-to-day operations.
Revel opened last April but has languished near the bottom of Atlantic City's 12 casinos in terms of gambling revenue. Many hoped that Revel would be the kind of game-changer that Atlantic City desperately needs to shake off a six-plus year stretch of plunging casino revenues and declining market share.
But it never really caught on. After reaching a high point of $20 million in revenue last August, Revel's take from gamblers sank, reaching just $6.2 million in November, a month in which all 12 casinos were affected by the aftermath of Superstorm Sandy. Its revenues have since rebounded somewhat to $9 million last month.
Bob McDevitt, president of Local 54 of the Unite-HERE union, has been one of Revel's most vocal critics. The casino is largely non-union, and has the only policy of its type in Atlantic City, under which most employees involved in customer service have to reapply for their jobs every four to six years.
“We believed the project was going to struggle from the beginning, and it did,” McDevitt said. He said DeSanctis' biggest mistake was “overestimating the market.”
He said the union plans to reach out to Hartmann to see if a better relationship can be forged.
McDevitt also said Revel's timing was particularly bad, getting under way just before the national economy cratered in 2007, when it was too far along to abandon. Initial investor Morgan Stanley pulled out and took a $1 billion loss on the project rather than see it through.
“At a time when other projects around the gambling industry were stalled, they marched forward,” McDevitt said. “They took a risk and they got burned by it.”