June 20 (Bloomberg) -- Revel AC Inc., whose Atlantic City, New Jersey, casino resort has struggled since it opened in 2012, sought bankruptcy protection to pursue a sale after going through reorganization a little more than a year ago.
Revel opened in April 2012 at a cost of $2.6 billion, only to shut down for five days a few months later because of Hurricane Sandy. It filed for bankruptcy in March of the following year.
The casino will continue operating during the current bankruptcy, the company said yesterday in a statement. Revel, which employs about 3,140 workers, may be forced to close for good if it fails to attract a buyer at auction, according to a copy of a letter to employees obtained by Bloomberg News.
“We will work to reach an agreement with a new owner who will help ensure Revel’s long-term financial stability,” Scott Kreeger, the president and chief operating officer of the casino hotel, said in the statement. The company said it has already arranged $125 million in financing from Wells Fargo & Co. to carry it through bankruptcy.
Revel was the first new casino in town to not enjoy at least at an initial run of success, Jim Whelan, a Democratic state senator from Atlantic City, said in a phone interview.
“It was caught in horrible timing, in terms of the national economy and the ferocious competition on the East Coast,” he said. “The hope is we can find a buyer to keep the place going.”
The area’s casinos have seen a steady decline after neighboring states, including Pennsylvania and Maryland, lured away customers. Casino revenue has fallen more than 40 percent to just over $2.8 billion in 2013 since reaching a yearly high of more than $5 billion in 2006. The Atlantic Club Casino Hotel filed for bankruptcy last November.
The Revel casino and resort, on Atlantic City’s Boardwalk, has about 130,000 square feet of gaming space, with 2,400 slot machines, 130 table games and a poker room, according to its website. The resort has 1,399 rooms, indoor and outdoor pools, as well as 13 restaurants and night clubs.
Its initial focus on high-end dining and non-gambling revenue was in stark contrast to the city’s other properties and prompted new managers to focus more on gamblers, Robert Shore, an analyst with Union Gaming Group in Las Vegas, said yesterday in a report.
Despite all that, Revel was forced to seek additional liquidity last November from lenders, who provided more funding in return for stricter terms and required the company to hire an investment banker to advise on a sale or alternative transaction, according to court filings.
Revel told workers their jobs may be terminated as early as Aug. 18 if it can’t sell the business as a going concern, according to the employee letter. The 60 days’ notice is in compliance with laws that require companies to warn workers of possible mass job cuts.
The Borgata Hotel Casino & Spa, a joint venture of Boyd Gaming Group and MGM Resorts International, would be the most likely beneficiary of a Revel shutdown, Shore said in his report.
About 800 Revel employees voted this month to unionize, joining 100 who are already represented by organized labor, according to court documents.
“A sale of Revel to a buyer who wants to keep the property open and retain the employees is the best thing for the workers, for Atlantic City and for Revel, and Local 54 is committed to working with all parties to save the jobs,” Bob McDevitt, president of the union local, said in an e-mailed statement.
The company listed as much as $1 billion each in assets and debt in its Chapter 11 filing yesterday in U.S. Bankruptcy Court in Camden, New Jersey. Five affiliates also sought court protection.
Revel owes about $137 million on secured revolving facilities with JPMorgan Chase Bank NA as the agent, court papers show. It owes about $310 million to lenders under another secured term loan with Wilmington Trust NA as agent.
Under the previous restructuring, Revel cut its debt by about $1.2 billion, handing ownership of the company to creditors. Chatham Revel VoteCo LLC owns 27.4 percent of the equity, Canyon RC Holdings LLC has a 15.7 percent stake and American High-Income Trust owns 11.5 percent of the company, according to court papers.
Even cutting debt by more than 82 percent wasn’t enough to revive Revel’s fortunes as Atlantic City’s casino revenue continued to evaporate, decreasing more than 6 percent last year, according to data compiled by Bloomberg.
The new case is In re Revel AC Inc., 14-bk-22654, U.S. Bankruptcy Court, District of New Jersey (Camden). The previous case is In re Revel AC Inc., 13-bk-16253. U.S. Bankruptcy Court, District of New Jersey (Camden).
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