Tropicana Entertainment files for Chapter 11 protection after Atlantic City casino loss

The Associated Press

Published: May 6, 2008

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ATLANTIC CITY, New Jersey: The owner of Tropicana casinos in Atlantic City and Las Vegas has filed for Chapter 11 bankruptcy protection, nearly five months after New Jersey regulators stripped the Tropicana Casino and Resort of its license.

Tropicana Entertainment LLC said Monday it plans to continue operating its remaining properties throughout the United States, including the famed Tropicana Casino and Resort on the Las Vegas strip, and will keep current staffing levels.

The company was buffeted by a chain of events that began Dec. 12 when the New Jersey Casino Control Commission determined that the company was incapable of running the "first-class operation" required by state law and stripped the Tropicana in Atlantic City of its casino license after less than a year.

That touched off a funding crisis that the company desperately struggled to fend off until filing for protection in U.S. Bankruptcy Court in Delaware, listing assets of $2.8 billion (€1.81 billion) and liabilities of $3.3 billion (€2.13 billion).

Scott C. Butera, the company's president, called the filing "an opportunity to take a breathing spell," get its debt under control, and move forward.

He urged current patrons of the Tropicana and the company's other casinos to keep coming.

"This is the first step in making things much better," he told The Associated Press in an interview Monday. "I'd encourage them to remain a customer of the Tropicana, and I'm sure the customer will be rewarded as we do better things and invest in our assets."

He said the company generates positive cash flow from its operations and has lined up $67 million (€43.34 million) in debtor-in-possession financing from Greenwich, Connecticut-based Silver Point Finance LLC.

"We have more than adequate resources to meet our ongoing financial needs," Butera said. "We will continue to offer our visitors and players a full range of lodging, entertainment and gaming services."

The bankruptcy filing covers nine properties: The Tropicana Casino & Resort in Las Vegas; Bayou Caddy's Jubilee Casino in Greenville, Mississippi; Casino Aztar in Evansville, Indiana; Horizon Casino Hotel in Vicksburg, Mississippi; Horizon Casino Resort and the MontBleu Resort Casino & Spa, both in Lake Tahoe, Nevada; the Tropicana Express Hotel & Casino in Laughlin, Nevada; River Palms Resort & Casino in Laughlin, Nevada; and the Sheraton Hotel and Belle of Baton Rogue Casino in Baton Rouge, Louisiana.

The filing does not cover the Tropicana in Atlantic City, which is in the process of being sold by a state-appointed conservator. The sale was mandated when the former owners lost their license in December.

The other Tropicana Entertainment property excluded from the bankruptcy filing is the Lighthouse Point Casino in Greenville, Miss.

Casinos owned by a corporate affiliate — the Amelia Belle Casino in Louisiana, and the Westin Casuarina Las Vegas Hotel Casino & Spa, are also excluded from the filing.

In court documents, Butera decried the decision by New Jersey regulators to wrest control of the Atlantic City Tropicana from the company, saying that led directly to the anticipated bankruptcy filing. He laid out a cascading series of problems that formed a perfect storm that befell Tropicana's owners almost from the moment they took over the property on Jan. 3, 2007.

When they bought Aztar Corp. for $2.1 billion after a heated bidding war, the company unwittingly violated a fundamental principle of business: buying high just before the market fell.

Using tactics they had successfully employed elsewhere, management began cost-cutting measures including nearly 1,000 layoffs in Atlantic City, prompting an uproar from unions.

A slowing national economy made gamblers more cautious about parting with their money, and real estate values plummeted as well. Then credit markets tightened, leaving Tropicana Entertainment "very little margin for error," Butera wrote in court filings. The company simply could not afford any significant setbacks, he added.

The company suffered a huge setback with the loss of the Atlantic City casino license. The company is appealing the license denial, but the bidding process is well under way and a new owner could be selected within a few weeks.

The company will receive the proceeds from the sale but is worried that a forced sale in a bad economy will result in a depressed price.

It is already selling its Evansville and Vicksburg casinos to help reduce its debt and could decide to sell other assets as the restructuring process unfolds, Butera said.

The filing asks the court's permission to continue to make wage and benefits payments to employees, honor customer loyalty programs, and pay critical vendors and suppliers while continuing to operate uninterrupted.