CAMDEN — Revel will be allowed to emerge from bankruptcy before the end of this month with about $1 billion less in debt and access to as much as $69 million in additional new financing, a judge ruled Monday.
“Notwithstanding the challenges that await the debtors ... a reasonable prospect of success has been shown on this record,” U.S. Bankruptcy Court Judge Judith Wizmur said in confirming the plan, which is expected to take effect over the next couple of weeks.
But don’t expect the megaresort — which cost $2.4 billion to build and has been operating at a loss since it opened a little more than a year ago — to turn a profit right away, officials said.
“We’re going to continue to lose money,” Chief Restructuring Officer Dennis Stogsdill said in an interview after the judge’s ruling. “There’s a turnaround period.”
The financially strapped casino projects it may take until next year before Revel has positive earnings, and four years before it has positive net income. Revel filed for bankruptcy only a few months ago, opting to proceed with a prepackaged restructuring after creditors agreed to swap about $1 billion of loans for an equity stake in the company and put up additional money to help it through bankruptcy.
As part of exiting bankruptcy, creditors will extend to Revel a $275 million term loan — much of which will go toward paying off a prior debt — and as much as $75 million in an additional revolving credit loan. While nearly all of the money will be spent immediately after Revel emerges from bankruptcy to pay off professional fees and other business expenses, as much as $69 million will remain and be available to Revel for future expenses, Stogsdill said.
But some lawyers representing construction contractors and other businesses in the midst of suing Revel questioned whether the financing would be available in the future given Revel’s poor financial showing during the past year. Revel never has been profitable in the year it has been in operation.
“Look at the history — the history doesn’t show that,” said Warren Martin, a lawyer representing one of the businesses owed money.
He and other lawyers asked Wizmur to require Revel to set aside money that would be used to pay contractors should they win in court against the megaresort. Barring that reserve, the lawyers asked Wizmur to hold off on confirming the restructuring plan.
But Wizmur ruled to approve the plans, citing Stogsdill’s projections as demonstrating a “reasonable probability of success.” She also declined to impose a reserve, saying there was no legal requirement to do so.
“While we might question the achievability of the precise numbers ... we can rely on them in a general sense,” Wizmur said. “Feasibility is never guaranteed. What we are looking for is reasonable probability of success. ... Here, I believe that showing has been made.”
Creditors, who now have an equity stake in the company, were willing to extend the additional financing provided the megaresort meet certain milestones but did not require Revel to turn a profit in the short-term, Stogsdill said. That is because they know it will take time for Revel to turn its business around.
Revel recently added a high-limit slot lounge and is in the process of creating a new marketing campaign and building a beach bar and new dining options expected to appeal to gamblers.
“Very shortly we will be converting the casino to smoking, which will increase revenue dramatically,” Stogsdill said.
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