A federal judge is slated to hold a hearing Friday on Revel Casino Hotel’s “emergency” request for permission to sell the defunct resort to developer Glenn Straub’s company instead of Brookfield US Holdings.
But Straub, whose company was named runner-up of a bankruptcy auction with a $95.4 million bid, told The Press Wednesday that he doesn’t plan on attending.
“I’m pretty sure we’re not going to be there,” he said, referring to his legal team.
Straub wouldn’t say whether he still wants the property but said he considers himself the runner-up bidder. He said it’s unclear who will end up owning the closed resort. “This is a crapshoot,” he said.
Revel said Brookfield won the auction with a $110 million offer. Straub, called a stalking horse for making the opening bid, appealed the decision in court, claiming the auction was tainted by a conflicts of interest and ever-shifting rules.
On Tuesday, Revel asked Chief U.S. Bankruptcy Judge Gloria Burns for approval to cancel a planned sale to Brookfield.
In court papers, Revel said Brookfield had “repudiated” the deal and failed to finalize it by a Nov. 28 deadline.
Revel said it gave Brookfield a prospective notice of termination of the planned sale, and that the notice takes effect Friday at 5 p.m.
The move was the latest major snag in a bankruptcy sale effort fraught with controversy and delay.
Last month, Brookfield said it planned to abandon the proposed Revel deal because it was unable to satisfactorily rework bond debt connected to construction of Revel’s power plant.
A Brookfield spokeswoman declined to comment Wednesday. A Revel spokeswoman could not immediately be reached for comment Wednesday.
ACR Energy Partners, effectively Revel’s sole power supplier, helped build the plant with $118.6 million in municipal bonds and a roughly $40 million equity investment.
Revel’s 20-year energy contract with ACR required Revel to repay the bond debt with about 11.6 percent interest on average. The equity investment had to be repaid with 15-18 percent interest.
The deal, which saddled Revel with more than $1.5 million in monthly power-plant financing fees before it paid a penny for any actual energy used, has dogged Revel in and out of bankruptcy court.
Straub has said he will cancel the contract. But it’s not clear that there’s another energy supplier on-hand with infrastructure to power the Revel complex. And without the energy to operate climate-control systems, fungus could quickly savage the building.
Straub said Wednesday that Brookfield should have known that its latitude to deal with the bond debt was limited.
“This wasn’t a catering contract for pizza to the executive’s office,” he said.
And he said he will not drop his court appeal over what he claims was a patently unfair auction.
He said he’s pursuing a “landmark decision” to inject more fairness into the auction process in America. “Ours is what’s called a test case,” he said.
Jonathan Lipson, a professor at Temple University’s Beasley School of Law who studies the bankruptcy process, said that might be true.
It’s rare to see a stalking horse challenge auction procedures, Lipson said. “You don’t see these challenges very frequently. In fact, I don’t ever recall seeing them.”
That’s because once a sale is consummated, and a judge determines it was done in good faith, it’s virtually impossible to mount a successful appeal, he said.
But the Revel sale hasn’t closed, so “the disappointed bidder has a better chance of pursuing the litigation,” Lipson said. Here. “So many things have gone wrong in ways that don’t normally go wrong.”
In vowing to continue his appeal, Straub is “behaving very rationally,” Lipson said
Straub could be pursuing an appeal to further some lofty ideals about bankruptcy bidders’ rights. But he could also be exerting leverage to drive down Revel’s purchase price, Lipson said.
And Revel is particularly vulnerable right now: “Every day that they don’t have a deal is a really bad day for Revel.”
Straub seems to be employing a carrot-and-stick strategy in the Revel case, Lipson said.
The carrot is his offer for Revel. “The stick is this litigation,” Lipson said. “He’s wielding both.”
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