ATLANTIC CITY, N.J. – Atlantic City’s Revel Casino Hotel warned its staff Thursday that it will shut down this summer if a buyer can’t be found in bankruptcy court.
In warning letters given to employees and obtained by The Associated Press, Revel said it is seeking a buyer for the struggling $2.4 billion casino, but can’t guarantee one will be found. If not, employees could be terminated as soon as Aug. 18, Revel said in the letter.
“If Revel is unable to complete such a sale promptly, Revel expects to close its entire facility,” the letters read. The company also said it plans to stay open while it searches for a buyer, operating as usual, honouring player comps and paying employees and vendors.
Shortly after distributing the letters, Revel filed a Chapter 11 petition with the federal bankruptcy court, its second in as many years. Revel said it hopes to find a buyer quickly.
“We will work to reach an agreement with a new owner who will help ensure Revel’s long-term financial stability and who shares our commitment to providing Revel’s guests and players an exceptional experience,” said Scott Kreeger, Revel’s president and chief operating officer.
He said the casino has obtained a $125 million loan from one of its existing financiers so it can operate during its stay in bankruptcy court.
It could not be determined how much Revel might sell for in a bankruptcy auction, but it is sure to be a steep discount. Wall Street analysts and some casino executives said last month that $300 million was too high a price for the casino. A union that has been at odds with Revel since before it opened pegged its value in April at $25 million to $73 million, based on public filings.
For much of the past year, Revel has sought a buyer for the property, which has remained eighth out of Atlantic City’s 11 casinos in terms of the amount of money won from gamblers. But it also kept the option of a second bankruptcy filing as potential buyers expressed interest but failed to pursue a deal.
The Seminole tribe of Florida, through its Hard Rock franchise, has indicated an interest “if the price is right.”
The casino is owned by investors who gained control of it during bankruptcy last year, swapping debt for equity in the property. The transaction wiped out 82 per cent of Revel’s $1.5 billion in debt.
But even with that extra breathing room, Revel continued to struggle. It acknowledged mistakes in marketing and operations, launching a massive campaign to try to win back patrons. But that backfired when a “You Can’t Lose” promotion offering to refund slot losses angered many customers who thought their losses would be refunded in cash. Instead, they were gradually credited to a Revel account over several months, with restrictions on when the credits could be used.
All this occurred against a backdrop of increasing competition from casinos in neighbouring states; four new casinos will soon open in New York. Atlantic City’s casino revenue fell from a high of $5.2 billion in 2006 to $2.86 billion last year.
Revel has never been profitable since it opened in 2012.
It posted a gross operating loss of $21.7 million in the first quarter this year. For all of 2013, it lost $130 million, up from the $110 million it lost during the nine months it was open in 2012.
Revel was seen as a potential game-changer when it opened, the first new casino in Atlantic City since 2003.
But its timing was exceedingly bad. The project broke ground just before the Great Recession, and it ran out of money halfway through construction. It was only after the state offered tax credits against future earnings that Revel was able to obtain the last $1 billion or so needed to finish building.
It never really connected with the Atlantic City casino market, presenting itself as a high-end luxury destination and eschewing trademarks of New Jersey casino culture like a buffet or bus trips for gamblers. It also was the only casino in New Jersey to ban smoking throughout, further alienating some gamblers. It dropped the smoking ban last year after emerging from bankruptcy.
Wayne Parry can be reached at http://twitter.com/WayneParryAC