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Tropicana buyers look to change terms of the deal
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ATLANTIC CITY — The buyers of the bankrupt Tropicana Casino and Resort are asking New Jersey gaming regulators to approve a restructured deal that could save them from a huge tax payment if they resell the property in the next few years.
The proposal would allow investors headed by billionaire Carl C. Icahn to acquire Tropicana through a stock transaction instead of the original plan to use $200 million of the casino debt they own, officials said.
The Icahn-led investors received bankruptcy court approval in June to buy Tropicana with a “credit bid,” meaning they planned to cancel $200 million in debt from a $1.4 billion mortgage they hold on the property in exchange for ownership of Atlantic City’s third-largest casino hotel.
Now, for tax purposes, they prefer to complete the purchase in a stock deal that would set Tropicana’s value at $700 million. But they would not actually pay an extra $500 million for the casino.
“The purchase price remains at $200 million,” said Jordan Bleznick, an attorney for New York-based Icahn Associates.
In describing the stock proposal Thursday to the state Casino Control Commission, Bleznick said the buyers would “inherit” Tropicana’s current $700 million tax value instead of having that figure reduced to $200 million to reflect the sale price.
Bleznick explained that the owners would be saddled with a huge tax liability if Tropicana is resold in the next few years for hundreds of millions of dollars more than $200 million. By setting the value at $700 million, they would avoid getting hit with a big tax payment if Tropicana is sold closer to that amount, he said.
Icahn and his fellow investors seem to be betting that Atlantic City’s depressed casino market will recover in years to come and they would be able to unload Tropicana for a lot more than the steeply discounted price of $200 million they are paying.
Bleznick told the commission that the buyers have no plans to part with Tropicana in the near future, but added that “ultimately, things are sold.”
Icahn is a super-investor who specializes in buying distressed properties and reselling them for a healthy profit. His purchase of Tropicana is similar to the way he acquired the old Sands Casino Hotel in bankruptcy in 2000 for the bare-bones price of $65 million and then sold it six years later for $270 million.
Tropicana was put up for sale after its former owners were stripped of their New Jersey gaming license in December 2007 following regulatory violations and mass layoffs that left the property filthy. The casino remains under the control of a state-appointed conservator until the Icahn group takes over.
Originally expected to sell for $1 billion or more, Tropicana’s value sank dramatically as the recession deepened and the Atlantic City gaming market withered. Icahn and his fellow investors timed the market perfectly by stepping in when no other buyers were willing to bid on Tropicana in a bankruptcy auction.
Bleznick said the sale is expected to close within the next month or two. In the meantime, the Casino Control Commission and the Internal Revenue Service will study the restructured buyout proposal before deciding whether to give approval.
If the new plan is rejected by regulators, the buyers simply would go back to the original proposal to acquire Tropicana through the $200 million credit bid. It would not delay the sale from closing, according to Bleznick.
Contact Donald Wittkowski:
609-272-7258
Posted in ATLANTIC CITY | BREAKING | BUSINESS on Thursday, November 12, 2009 6:50 pm
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