July 30 (Bloomberg) -- Revel AC Inc., whose Atlantic City, New Jersey, casino has been in bankruptcy twice since it opened in 2012, won permission to pay executive bonuses of as much as $1.75 million tied to the sale of its business.
U.S. Bankruptcy Judge Gloria M. Burns at a hearing today in Camden, New Jersey, authorized the company to make the bonus payments after the resort’s fate is determined at an auction set to be held next week.
“I’m satisfied that it’s an incentive plan and it’s good” for Revel and its estate, Burns said.
The company’s struggles illustrate the larger issues facing Atlantic City, which has already seen the Atlantic Club close and may have two other casinos shut down by the end of September. Caesars Entertainment Corp. plans to shutter the Showboat on Aug. 31 and the Trump Plaza Hotel & Casino said it plans to end operations on Sept. 16.
Revel plans to hold an Aug. 7 auction in hopes of pitting bidders against one another to generate the best possible offer and resuscitate the resort. Bids to compete in the auction are due Aug. 4.
The bonuses would only be paid if managers, whose identity isn’t disclosed, can bring in sale proceeds that reach a high enough threshold, which was also withheld from the public because the targets may affect the sale process.
“We have concerns that bidders may try to game the sale based on what they see” so the thresholds should be concealed, said John K. Cunningham, a lawyer for Revel. “Once we conclude the auction and have a successful bidder,” the scale will be revealed.
Bonuses would start at $250,000 for reaching the first sale target and grow as the sale increases in value, according to court documents.
A number of potential buyers submitted letters of intent that were “significantly below the first threshold” of the bonus plan, Warren A. Usatine, a lawyer representing unsecured creditors, told the judge.
Based on a review of the letters of intent that were submitted July 18 “even the lowest of the thresholds, while attainable, is not easy,” Usatine said.
The backdrop for Revel’s bankruptcy is the growing competition Atlantic City casinos face from gambling venues in neighboring Pennsylvania and Maryland.
Casino revenue in the New Jersey gambling mecca has plummeted more than 40 percent to about $2.8 billion in 2013 from a peak of more than $5 billion in 2006.
Revel, which employs about 3,140 people, told workers last month that it may be forced to close for good if it fails to attract a buyer. The company said their jobs may be terminated as early as Aug. 18 if it can’t sell the company as an operating business. The notice was given to comply with laws that require companies to warn workers of possible mass job cuts.
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 a first bankruptcy in March of the following year before seeking creditor protection again last month.
The 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.
The 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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