Senate President Stephen Sweeney warned Thursday that the $2.4 billion Revel megaresort appears “on the verge of bankruptcy and collapse” and he is demanding an explanation from New Jersey’s top casino regulator.
Sweeney outlined his concerns about Revel in a three-page letter to David Rebuck, director of the Division of Gaming Enforcement, the state agency that oversees Atlantic City’s casino industry.
In the letter, Sweeney criticizes Rebuck and the division for not keeping a close enough watch on Revel’s deteriorating finances. Sweeney, D-Gloucester, Salem, Cumberland, is demanding that Rebuck brief both him and Assembly Speaker Sheila Oliver , D-Essex, Passaic, on Revel’s “volatile situation.”
“Your oversight of Revel to date has neither impressed me nor many of my colleagues,” Sweeney told Rebuck.
Lisa Spengler, a Division of Gaming Enforcement spokeswoman, confirmed that Rebuck received the letter. She said Rebuck would respond to Sweeney directly.
“The division is actively monitoring negotiations between Revel and its lenders and is confident that all steps are being considered to maintain its operations,” Spengler said.
Sweeney’s letter follows Rebuck’s disclosure on Wednesday that Revel has hired a team of outside legal and financial advisers to help it restructure its $1.3 billion debt. Rebuck said it is not yet clear whether Revel is considering bankruptcy as an option.
Revel did not immediately respond to requests for comment Thursday on Sweeney’s letter. On Wednesday, the company issued a statement saying it is exploring alternatives for its capital structure, but it did not specifically mention bankruptcy.
Revel has been able to stay afloat through negotiations with lenders, including $150 million in additional financing secured in December. However, Sweeney told Rebuck it appears Revel is lurching toward bankruptcy.
“(It) is astonishing to me that an entity under your direct supervision and control that borrowed hundreds of millions of dollars just weeks ago, is on the verge of bankruptcy and collapse even before the ink is dry on the loan documents,” Sweeney wrote.
In the past several months, the state has imposed a litany of financial requirements on Revel, including a fresh batch following December’s $150 million deal. They include having Revel submit detailed financial reports and cash flow projections.
Revel must also provide the state with copies of its financial transactions as well as payments to the contractors that built the casino. For months, contractors filed millions in construction liens, although Revel has insisted that everyone will be paid what they are owed following a final audit. Sweeney said he understands Revel has not yet resolved all of the construction claims.
In a December 19 letter to Revel’s lawyer, New Jersey Deputy Attorney General John E. Adams Jr. stressed that the state wants to see Revel reverse its operating losses and build up its profits to a level that can support its debt payments.
Revel, Atlantic City’s newest casino, owes about $1.3 billion to its creditors and has struggled to keep pace with its financial obligations. On Monday, Revel said in a filing with the federal Securities and Exchange Commission that it is amending its credit agreement for the fourth time as part of its negotiations with lenders.
Sweeney noted that the credit amendment requires the hiring of a financial monitor. The amendment loosened Revel’s financial requirements, including the stipulation that it must maintain just $20 million in liquidity, Sweeney added.
Revel’s hiring of financial and legal experts follows another disappointing month for the casino’s gambling revenue. In January, Revel took in just under $8 million from its slot machines and table games, placing it next to last in gambling revenue among the city’s 12 casinos. Month after month, Revel has been mired near the bottom of the pack in gambling revenue.
The most recent quarterly profits report for the casino industry underscores Revel’s financial plight. Revel suffered a $36.8 million gross operating loss in the third quarter of 2012. The fourth-quarter report will be released by the Division of Gaming Enforcement in April.
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