On its first day in bankruptcy court, Atlantic City's newest casino revealed just how bad things had gotten.
A lawyer for the $2.4 billion Revel resort told a bankruptcy court judge Wednesday that the casino was within days of running out of money, and that it would have shut down had she not approved a plan for $250 million in temporary funding to get it through bankruptcy.
Judge Judith Wizmur approved the "debtor-in-possession" plan, allowing Revel to keep its doors open and the dice tumbling.
"They clearly need the money," attorney Mark Kieselstein told the court. Revel would liquidate if it did not get the temporary funding, he said.
Kieselstein said he was describing testimony that was ready to be given by an analyst who studied Revel's finances before the Chapter 11 filing, which was made late Monday night.
Wizmur said the $250 million financing plan is "absolutely necessary."
"It's a critical part of the broader picture, without which this operation cannot go forward," she said.
The judge also granted orders allowing Revel to continue to pay its employees and suppliers during bankruptcy, and to continue players' card loyalty programs.
Under a deal worked out with lenders that still needs the judge's final approval, Revel will eliminate 82 percent of its $1.5 billion debt by converting most of it into equity for lenders.
"There had to be massive deleveraging of the balance sheet," Kieselstein told the judge. "There was a billion dollars of debt that had to go away if this was going to work."
Revel's bankruptcy filing lists $1.1 billion in assets and $1.5 billion in liabilities.
Revel has languished near the bottom of Atlantic City's 12 casinos in terms of gambling revenue since opening on April 2. It posted gross operating losses of $35 million and $37 million in the second and third quarters of last year, and three rounds of extra financing last year totaling $200 million was not enough to get Revel through the winter.
In its court filings, Revel revealed it plans to drop its nonsmoking policy, joining Atlantic City's other 11 casinos in allowing patrons to smoke on part of the casino floor.
But allowing patrons to light up is only one of several big changes in the works. Its bankruptcy filing read like a laundry list of mistakes and misfortunes that caused the much-heralded resort to struggle sine the day it opened.
Among the missteps the company cited were a $100 million cost overrun it blamed on a contractor; the casino's failure to connect with day-trippers; too-expensive food and drinks; and the lack of a players' club. Closing for six days in the fall for Superstorm Sandy didn't help, either.
When Revel broke ground in 2007, the economy was still good and there weren't nearly as many casinos surrounding it in Pennsylvania and New York.
"It came into the world beset by difficulty," Kieselstein said. "At the time it opened, with its high leverage, Revel had virtually no margin for error."
Some of its lenders will provide the $250 million in debtor-in-possession financing, approximately $42 million of which constitutes new money commitments
In addition, lenders have committed $335 million in exit financing, which consists of a $75 million revolving loan and a $260 million term loan. The proceeds of the exit financing will be used to provide Revel with additional working capital, pay for some capital expenditures, repay the debtor-in-possession financing and pay expenses related to the restructuring when Revel emerges from bankruptcy court, the company said.
Kieselstein said Revel's finances had grown so dire that they were beyond gradual or incremental fixes.
"It's not a capital structure that can be fixed with a tweak," he said. "It's a capital structure that requires demolition."