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ATLANTIC CITY - Lenders are taking over Resorts Atlantic City in an unprecedented ownership switch that will keep the financially ailing casino hotel alive.

Resorts, the city's oldest casino, agreed in August to hand over the keys to its lenders after it defaulted on its $360 million mortgage and faced possible foreclosure. The plan was given regulatory approval Thursday by the New Jersey Casino Control Commission.

Resorts Chief Executive Officer Nicholas L. Ribis said the transaction will leave the casino debt-free by wiping away the mortgage. Lenders have agreed to forgive the debt in exchange for ownership in the property.

Ribis, who will run the casino for the lenders, said the next step is to develop a new strategy to help Resorts compete in a marketplace that has been battered by the weak economy and rival slot parlors in Pennsylvania.

"I see a rebranding as a possibility, I see an expansion as a possibility, and I see a redoing of some parts of the property as a possibility. With my new partners, all of that is possible," Ribis said in an interview with The Press of Atlantic City.

This is the first time in Atlantic City's 31-year history of legalized gambling that lenders have taken charge of a casino in this way. Noting the uniqueness and difficulties of the case, Casino Control Commission Chair Linda M. Kassekert called the takeover "an ungainly process, to put it mildly."

"Hopefully, as we move forward, we will have the best interests of the property, the best interests of Atlantic City and the best interests of the employees at heart," she said.

Regulators warned that other financially troubled casinos may also be taken over by lenders in the future.

"This case, although it may be the first of its kind, may not be the last," said Mary Jo Flaherty, a deputy state attorney general representing the New Jersey Division of Gaming Enforcement.

Resorts' new owner will be a newly formed company called RAC Atlantic City Holdings LLC. RAC is to be controlled by Wells Fargo Bank, acting on behalf of Credit Suisse First Boston Mortgage Securities Inc. Credit Suisse is the parent of Column Financial Inc., the holder of Resorts' mortgage.

Lenders will formally take charge when the deal closes within 10 days. They are reluctantly assuming ownership of Resorts, believing it is the best way of recovering their investment. The takeover is part of a stopgap plan to stabilize the casino's finances before a search begins for new owners. When exactly Resorts would be sold depends on the casino regaining its strength and the economy finally recovering from recession.

"We have no intention of operating the casino or the hotel well into the future," Peter Hoelzle, president of RAC, said of plans to sell Resorts as quickly as possible.

The lenders will replace current owner Colony Capital LLC, the private real estate investment firm that bought Resorts in 2001 for $140 million.

Ribis, Colony's partner, is seen as a possible future buyer.

"I love Resorts, and I intend to stay at Resorts as long as possible. If that includes an offer to buy it, that may happen," he said.

In the meantime, Resorts will operate under a limited casino license. The Casino Control Commission shortened the existing license, which was originally supposed to run through 2013, to only one year.

Lenders plan to immediately invest $8 million in Resorts to help it through its financial crisis. The cash infusion would also allow Resorts to fulfill the commission's requirement to maintain a $15 million reserve fund - essentially a safety net - to meet its financial obligations. It is currently falling short of the reserve fund, officials said.

Resorts is the city's second lowest-grossing casino. Its gaming revenue plunged nearly 17 percent through the first 10 months this year. More alarming, it has suffered a $23.9 million loss in net income through the first three quarters and a gross operating loss of $7.1 million.

Customers said Resorts needs to add more restaurants, table games and other amenities to make it more attractive. Lin and Gerry Colitti, a married couple from Randolph, Morris County, said Resorts is losing business to neighboring casinos because of a lack of restaurants.

"They are taking money away from Resorts and spending it at the Trump Taj Mahal," Gerry Colitti said.

Peggy Downing, a slots player from New York City, said Resorts seems to have held up well despite its age. Resorts was Atlantic City's first casino, opening on May 26, 1978.

"It's an older casino, but I don't have any problems with it," Downing said

Over the years, the Boardwalk property has reeled under bankruptcy, a succession of owners and its inability to keep pace with a new generation of larger, glitzier casinos.

Colony Capital acquired the casino from Sun International Hotels Ltd. in a bargain-basement deal. Sun had paid $301 million in 1996 to buy it from the late entertainer Merv Griffin. Griffin's ownership from 1988 to 1996 was marred by two bankruptcies.

Resorts' takeover continues an ownership shake-up in the gaming industry this year that began with a group of investors headed by billionaire Carl C. Icahn buying Tropicana Casino and Resort in bankruptcy for $200 million.

The three Trump Entertainment Resorts Inc. casinos, which are also in bankruptcy, would be bought by a group of bondholders under a deal reached this week with Donald Trump, the company's former chairman. The plan still must be approved by the bankruptcy judge overseeing the Trump case.

Contact Donald Wittkowski:

609-272-7258

DWittkowski@pressofac.com

2 comments:

• RandomX856 (158) posts 8:32 pm

  Resorts definitely needs a new name. When I hear "Resorts", tripping over senior citizens' oxygen canisters, while walking past the slot machines, comes to mind.

• Nikynewark (118) posts 10:13 am

  Here we go again with the lame economy excuse. Seems they were failing long before the economy melted down. I stopped going there years ago when they had a new car drawing and the winner just happened to be right by the office! Hello!!

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