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Icahn group appears to be winning bidder for Tropicana
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ATLANTIC CITY — A group of lenders headed by billionaire financier Carl C. Icahn appears to have locked up ownership of Tropicana Casino and Resort for $200 million after no other bids were received in the long-running search for a new buyer.
The bidding deadline closed at 5 p.m. Friday with no other offers made, according to Sean Mack, an attorney for the state-appointed conservator who is overseeing the sale.
However, Mack said that a potential buyer has expressed interest and may be allowed to submit a late bid if it is approved by a U.S. Bankruptcy Court judge. He did not disclose the potential buyer's name.
"We have been informed that a late bid may be submitted," Mack said. "Absent that, there will be no auction."
A competing bid could force a bankruptcy auction Friday. But if one is not submitted, Icahn and his fellow lenders are expected to be formally approved as Tropicana's new owners at a June 12 bankruptcy hearing, Mack said.
The Icahn-led lenders already hold a $1.4 billion mortgage on Tropicana. They were designated as the so-called "stalking horse," or leading bidder, in the bankruptcy sale. In bankruptcy proceedings, the stalking horse typically makes an initial offer that is accepted if no competing bids are received.
"We had been hoping to get at least one other bid," said Mack, blaming the recession for the dearth of offers.
Icahn could not be reached for comment Friday. Keith Schaitkin, an attorney in Icahn's New York office, declined to comment.
Tropicana has been on the market since December 2007, when the New Jersey Casino Control Commission stripped the troubled former owners of their license and put the property under the control of a conservator.
Originally, Tropicana was expected to fetch at least $1 billion, but the recession and the casino's deteriorating financial performance drastically reduced its value. Timing the downturn in the market perfectly, Icahn and his fellow investors jumped into the fray by offering a bare-bones bid of $200 million in March.
Offers that were made last year but were rejected by Tropicana conservator Gary S. Stein included $950 million by a New York investment group and $850 million by Colony Capital LLC, the owner of the Atlantic City Hilton Casino Resort and sister property Resorts Atlantic City. Stein said previous offers were either "unreasonably low" or lacked the financing to back them up.
Cordish Co., a Baltimore-based real estate developer, once offered to buy Tropicana for $700 million in cash and notes or $575 million in an all-cash deal. But the company lowered its bid to an undisclosed amount when the recession got worse, only to have its deal fall apart in negotiations with Stein. With Cordish out of the picture, the Icahn group stepped in.
Icahn's purchase of Tropicana is strikingly similar to the way he bought the Sands Casino Hotel in a 2000 bankruptcy sale for the dirt-cheap price of $65 million. He sold the now-defunct Sands six years later for $270 million. The buyer, Pinnacle Entertainment Inc., imploded the Sands in October 2007 to clear room for a new casino project that has been stalled by the recession.
While the Sands was Atlantic City's smallest casino hotel, Tropicana is one of the largest. The sprawling property includes 140,000 square feet of gaming space, 2,129 hotel rooms and a mall-like retail and entertainment complex called The Quarter. Completed in 2004, The Quarter was built for $285 million - more than what the Icahn group will now pay for the entire casino property.
Icahn's purchase of the Atlantic City casino is a key part of his plans to acquire virtually the entire Tropicana Entertainment LLC gaming empire. Tropicana Entertainment and its corporate affiliates lost control of the Tropicana casino when their New Jersey license was revoked in the wake of mass layoffs and regulatory violations.
In a separate bankruptcy case, Tropicana Entertainment received court approval earlier this month to restructure its finances. Icahn is lending Tropicana Entertainment $150 million to help it emerge from Chapter 11 bankruptcy protection as an essentially new company. His investment will increase his ownership stake in the company's portfolio of casinos in Nevada, Louisiana, Mississippi and Indiana.
Tropicana Entertainment has discussed combining its existing casinos with the Atlantic City property under Icahn's ownership. If such a corporate structure is approved by New Jersey gaming regulators, Tropicana Entertainment could possibly return as the owner of Tropicana Atlantic City nearly two years after it lost its license.
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Posted in Breaking, Atlantic_city on Saturday, May 30, 2009 6:30 am Updated: 5:42 pm.
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