Operators of the $2.4 billion Revel casino, which opened last April in Atlantic City, announced plans last week to file Chapter 11 bankruptcy in late March. The bankruptcy will help reduce its more than $1 billion debt and allow it to keep operating, reported MSN MoneyNOW.
According to the Star Ledger, the casino resort was an attempt to turn around Atlantic City’s staggering fortunes and keep gamblers from continuing to flock to casinos in neighboring Pa., which last year surpassed N.J. as second-largest gambling center in the U.S., behind Las Vegas.
New Jersey Gov. Chris Christie hailed the resort as a “game-changer” and it was therefore provided with $300 million worth of aid by the state. But he couldn’t have been more wrong.
The casino did not transform Atlantic City’s struggling gambling scene as hoped, instead it has performed poorly over the past 11 months. In January, Revel generated less than $8 million in casino revenue, ranking it last among the city’s 12 casinos, according to state data.
According to News 12 New Jersey, the pre-packaged bankruptcy will wipe away more than $1 billion of its debt by converting more than $1 billion of it into equity for lenders.
Revel officials and its lenders decided that the prepackaged Chapter 11 would ultimately be the best way to eliminate the substantial debt and create better changes for growth when restructuring.
“The reduction of debt service expense this agreement facilitates will greatly improve Revel’s cash flow to better support day-to-day operations,” said Revel’s chief investment officer, Mark Garrity.
As part of its aid package, Gov. Chris Christie and administration have given Revel a Redevelopment and Growth tax incentive award of $261 million, which will allow Revel to receive rebate tax revenues over the next 20 years. Taxpayer funds were not provided up front.
Many have criticized the aid, claiming that the state’s failure to notice Revel’s quick downturn was careless. In the Press of Atlantic City, Bob Devitt, head of Atlantic City’s largest casino union was quoted saying, “We warned them this would be a catastrophe, but no one listened. Now, it’s a catastrophe.”
The resort has had a rocky start from the beginning of its construction, reported News 12 New Jersey. It had to overcome numerous problems before its opening and although it has booked some of the biggest names in show business including Beyonce, Kanye West and Aerosmith, it still failed in helping the casino generate enough revenue.