Revel, the new casino many people had hoped would turn around Atlantic City's sagging fortunes, said Tuesday that it will file for Chapter 11 bankruptcy protection in March, less than a year after it opened.
The voluntary, prepackaged bankruptcy envisioned for late March will wipe away about two-thirds of its $1.5 billion in debt by converting more than $1 billion of it into equity for lenders.
Kevin DeSanctis, Revel's CEO, said the restructuring will give the casino resort more flexibility to operate.
"Today's announcement is a positive step for Revel," DeSanctis said. "The agreement we have reached with our lenders will ensure that the hundreds of thousands of guests who visit Revel every year will continue to enjoy a signature Revel experience in our world-class facility."
Existing management will remain in place, no layoffs are planned, and employees and vendors will be paid as usual, the company said. The restructuring should be completed by early summer, it added.
The $2.4 billion casino never caught on as much as it had expected to, and it remained mired toward the bottom of Atlantic City's 12 casinos in terms of casino revenue. Revel had to line up two rounds of additional financing since August to keep operating.
In January, it posted its second-worst month, winning less than $8 million from gamblers. During the second and third quarters of last year, it reported gross operating losses of $35 million and $37 million.
Revel's work force is largely nonunion, a fact that earned it the undying enmity of Local 54 of the Unite-HERE union, representing most of the city's casino workers.
"Over three years ago, Local 54 began expressing to every elected official in the city, the state and the governor's office that this project was doomed to failure," said Bob McDevitt, the union's president. "Had they listened to us three years ago, we would not have this catastrophe on our hands now."
Michael Drewniak, Gov. Chris Christie's press secretary, expressed confidence in Revel.
"We are committed to the resurgence of Atlantic City, the tourism district, and the many efforts currently under way to bring world-class attractions and entertainment to the city," he said. "A rejuvenated Revel will remain an integral part of that landscape, as it continues full operations as a premiere hotel, gaming and top-flight entertainment hub for the city, in addition to employing more than 2,000 people. Most importantly, none of those things that make Revel among Atlantic City's highest-profile attractions will change, as Revel uses this new financial flexibility and the continued backing of its investors to grow the business and be part of Atlantic City's expansion."
David Rebuck, director of the state Division of Gaming Enforcement, said the Chapter 11 filing needs to happen.
"The agreement between Revel and its lenders will allow for a necessary financial restructuring and improve the property's financial condition going forward," he said. "We see this as a positive step that will allow Revel to comprehensively address its financial needs while continuing normal business operations."
Revel officials have been reviewing their options in recent months as the Atlantic City market continued to decline and its own revenues remained stuck in neutral. DeSanctis said the company and its lenders decided that a prepackaged Chapter 11 would be the best way to improve its balance sheet by eliminating substantial debt and increasing the changes for growth.
It is the latest in a series of recent bankruptcies involving Atlantic City casinos. Trump Entertainment Resorts emerged in 2010 from the third Chapter 11 bankruptcy that it or its corporate predecessors had filed, and the Tropicana Casino and Resort was sold that same year out of bankruptcy court to billionaire Carl Icahn.
As part of the restructuring, some of Revel's lenders will provide approximately $250 million in debtor-in-possession financing, about $45 million of which constitutes new money commitments and approximately $205 million of which is pre-petition debt. No taxpayer funds will be used to finance the restructuring, the casinosaid.
The company didn't identify which lenders will be part of the filing; it said only that "a majority" of its lenders have agreed.
Revel opened in April as a potential game-changer, the first new casino built in Atlantic City since the Borgata Hotel Casino & Spa opened in 2003.
Revel was designed as a destination resort, an ambitious, risky project in a declining market. It saw itself not as a casino resort but as a resort that happened to have a casino. But the distinction seemed to have been lost on many customers, who found its restaurants and hotel rooms pricey.
The project had to overcome numerous obstacles before its opening. Three key executives working on the project died in a Minnesota plane crash in July 2008; a worker pouring concrete was struck by lightning and killed in 2011.
The project ran out of money during the recession and had to stop construction halfway through. Morgan Stanley pulled out, taking a $1.2 billion loss on the project. It only got completed with the help of state tax incentives that were approved in February 2011.