he lenders would act as the stalking horse bidder with a us$ 200 million credit bid for the troubled Tropicana.
Yesterday afternoon's 5-0 vote paves the way for the casino's trustee, Gary Stein, to file for Chapter 11 reorganization so that the casino can be sold at auction free and clear.
"This is a major step toward getting the Tropicana into the hands of owners who can meet New Jersey's strict licensing requirements," commission chair Linda Kassekert said after the decision.
Billionaire developer Icahn previously owned the Sands Hotel Casino on the Boardwalk before selling it and adjacent land in late 2006. Stein said will file for Chapter 11 reorganization by 4 o'clock with the U.S. Bankruptcy Court in Camden. The court can schedule a hearing for as early as this Friday, one of Stein's lawyers said.
Bids could be accepted by as early as May 8, said the lawyer, Sean Mack. "After the vote, I'm very please we got the approval by the commission," said Stein, who is a former New Jersey Supreme Court justice. "It allows us to move forward with eh sale of the asset, in what's known as a Section 363 auction in bankruptcy court. "I'm very encouraged by today's developments."
The Tropicana's tortuous sale process was triggered in December 2007, after the commission stripped the casino's former owner - William J. Yung III - of his gaming license.
The lending crisis, financial problems by the former owner, and the collapse of several Wall Street firms - including Bear Stearns, which was Stein's financial adviser for the sale of the Trop - had led to delays in selling the property.
In the 14 months that the Tropicana had been on sale, beginning February 2008, Stein could not reach an agreement with any bidders, and finally negotiated the deal with the casino's senior lenders last month. But the auctioning of the casino comes amid an even more challenging environment, say analysts, and that could limit the number of potential bidders.
The seaside gambling resort reported a 19.4 % decrease in revenue last month compared with March 2008 - its largest year-over-year decline in the 31-year history of gambling here.
The casinos here have lost a substantial chunk of their business to new slots parlors in the Philadelphia suburbs, located in Chester and Bensalem. The Valley Forge Convention Center in Upper Merion Township, Montgomery County, was recently approved for 500 slot machines, and Philadelphia is on its way to adding two casinos.
"Atlantic City is still a day-trip, weekend-oriented market versus a true destination resort," said Alex Picou, managing director of gaming, travel and leisure for KeyBanc Capital Markets in New York. "You still have competitive factors with the specter of additional competition from Philadelphia, and Delaware is contemplating table games.
"The entire Northeast is only going to get more competitive, and that hurts Atlantic City," Picou said. At least two casino companies acknowledged as much. "Atlantic City is not where we're currently focusing our attention," said Eric Schippers, spokesman for Penn National Gaming Inc., which is based in Wyomissing, and operates Hollywood Casino in Grantville.
The firm, which is sitting atop a huge cash reserve after a proposed merger failed to materialize last year with two private equity firms, has its eyes on expansion opportunities in Ohio, Kansas and Maryland.
Jeffrey Hartmann, COO of Mohegan Sun Casino in Connecticut, said Mohegan Sun was also taking a pass on the Tropicana. He cited the credit crisis, and the amount of investment it would take to redevelop the nearly 28-year-old casino as factors in the decision. "It's not just the cost of buying it out of bankruptcy, but what the renovation investment will have to be to bring up to our standards," Hartmann said. "Given the current number of cash flow it's generating, we don't believe that the return on investment will be viable in this market."
The Tropicana reported a 21.1 % decrease in revenue last month compared to a year ago, and a year-to-date decrease of 16.4 %. The Tropicana is not alone in its problems. Other casinos here are struggling, as well.
Trump Entertainment Resorts Inc., which owns the three Trump casinos here, filed for Chapter 11 in February and is in the midst of its third restructuring. Resorts Casinos is fending off foreclosure and trying to work out a deal with its lenders. Today's action on the Tropicana will not affect its daily operations, Stein said.
In approving the asset purchase and the move into bankruptcy court, the commission also extended the deadline 120 days for selling the Tropicana, to the end of the year.
Kassekert said the additional time was based on estimates on how long the bankruptcy and licensing processes would take.