Nov. 30 (Bloomberg) -- New Jersey Senate President Stephen Sweeney is seeking a detailed financial report on Atlantic City’s Revel casino, saying the state-supported gaming operation is “burning cash at an alarming rate.”
Revel received a $100 million line of credit from its backers in August to help it through next year, Sweeney, a Democrat from West Deptford, said today in a letter to David L. Rebuck, director of the state’s Gaming Enforcement division. That credit has been used up and the casino is looking for outside funding to survive through the end of the year, he said.
“I continue to receive a flood of reports that its creditors are still waiting to be paid for services rendered,” Sweeney wrote. He requested a detailed report on the casino’s financial stability by Dec. 7, a week from today.
Revenue at Atlantic City’s 12 gaming venues fell 20 percent to $209 million in October, including four days when they were shut because of Sandy, the superstorm that ravaged New Jersey Oct. 29. Moody’s Investors Service said casino profit in the city could fall 25 percent to 50 percent this quarter and next. Moody’s cited single-property operators such as Revel Entertainment Group LLC as most at risk.
“Revel’s financial situation is not dire,” the company said today in a statement. It said it is in discussions with its lenders to provide more capital.
The $2.4 billion casino, which opened in April, was to be a catalyst for Atlantic City’s transition from day-trip to luxury resort destination. Governor Chris Christie kept the project alive with $260 million in tax incentives, part of a state-sponsored marketing push urging customers to “Do AC.”
Instead Revel, which features 10 pools, 14 restaurants and almost 1,900 hotel rooms, sucked business from neighboring properties. The company’s $850 million term loan due in February 2017 fell to 54 cents on the dollar today, according to a person familiar with the matter who asked not to be identified because the trades are private. The debt traded as high as 60.5 cents on the dollar on Nov. 21 after the casino operator said it was seeking to raise new money.
“The additional capital will provide us with the liquidity necessary to allow the market to recover from Hurricane Sandy, and execute our strategic build-out of exciting new gaming, food and beverage, and entertainment amenities,” Chief Executive Officer Kevin DeSanctis said in the Nov. 21 statement.
Sweeney, an ironworkers union organizer, said he first became concerned that Revel’s finances were in bad shape when he began to hear from contractors that they weren’t getting paid. More recently, he said the casino hasn’t paid $12 million in property taxes, the first time a New Jersey casino has ever fallen behind on any levies.
The city and the company issued a statement today saying “they are amicably and expeditiously negotiating to resolve” tax issues, without being more specific. Revel also said it has made leadership changes in its hotel operations and casino marketing that would lead to improvement.
“These guys are burning through money, things are not getting any better and the state is a partner in all of this,” Sweeney said today in an interview.
The state gaming agency has Sweeney’s letter “under review,” according to Lisa Spengler, a spokeswoman.
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