Nov. 08–The Atlantic Club Casino Hotel has filed for bankruptcy.
The casino is seeking Chapter 11 bankruptcy protection in federal court to facilitate an expedited sale while the property continues to operate, Atlantic Club announced Thursday. The move follows the public collapse of a plan earlier this year to sell the casino to online poker giant, PokerStars, in a disagreement still tied up in another courtroom.
“We believe in our property’s positioning and the value-centric niche we committed to nearly 18 months ago. Our creative branding campaign and the tremendous efforts of our employees have resulted in property growth within a continually challenged market,” said Michael Frawley, the casino’s chief operating officer. “Unfortunately, the market has taken longer to rebound than we had hoped.”
Documents filed in U.S. Bankruptcy Court show that the casino owes more than $1.4 million in legal fees and nearly $3.7 million in fees for trade services. The casino’s largest creditor is recorded as its own employee pension plan, whose debt is listed as “unknown.”
New Jersey regulators stressed that they’ve been aware of the casino’s financial situation and noted that Atlantic Club is expected to remain open during the Chapter 11 process, which has been used by a number of Atlantic City casinos. Revel Casino-Hotel emerged from a Chapter 11 bankruptcy proceeding in May.
PokerStars, based on the Isle of Man, hoped to buy Atlantic Club for the steeply discounted price of $15 million earlier this year in what would have been the first instance of an online gambling company purchasing a brick-and-mortar casino in the United States. But when regulators stalled on licensing procedures, Atlantic Club walked away from the deal and a lawsuit followed. A New Jersey Superior Court Judge has ruled Atlantic Club could keep $11 million in advances from PokerStars while reneging on the deal, a decision that PokerStars has appealed.
Court documents in the Superior Court case revealed that PokerStars parent company, The Rational Group, funded Atlantic Club’s operating shortfalls since October 2012 with as much as $750,000 a week as an advance on the purchase. Those documents also stated that the casino’s owners are facing more than $30 million in unfunded pension liabilities. That figure is not used in the latest court filings.
“The bankruptcy process has been successfully used by several Atlantic City casinos in the past. In those cases, the casinos were able to remain open while additional financing was pursued,” New Jersey Division of Gaming Enforcement Director David Rebuck said. “Atlantic Club will remain open for business, and the bankruptcy filing will not have any impact on Atlantic Club’s customers.”
Casino Control Commission Chairman Matthew Levinson said he expects the proceedings to provide the company with the financial stability it needs to continue functioning.
“The Division of Gaming Enforcement has been monitoring Atlantic Club’s financial situation for some time,” Levinson said. “The decision to file for reorganization will place Atlantic Club on a firmer financial footing and help support its long-term success. As the process moves forward, we will be ready to review any court approved reorganization plan and address any casino licensing matters that may arise from it.”
After suffering a more than $19 million gross operating loss in 2012, Atlantic Club has shown signs of recovery under a rebranding that has marketed the property as a low-cost casino with the best deals in town. It was the only Atlantic City casino to record an increase in gaming revenue in September, with a 4 percent gain. In the first nine months of the year, the casino is up 11 percent in gambling revenue.
The Atlantic Club, formerly, the Atlantic City Hilton Casino Resort, has been owned since 2005 by Resorts International Holdings, an affiliate of the California-based private real-estate investment firm Colony Capital LLC.
The then-Hilton was valued at $513 million when it was acquired by Colony in 2005 as part of a $1.24 billion deal for four casinos in New Jersey, Mississippi and Indiana.
Rational Group spokesman Eric Hollreiser decline to comment on Atlantic Club’s situation.
The company’s lawsuit against Atlantic Club was recently moved from the chancery division of New Jersey Superior Court to the law division. The case is assigned to Judge Nelson Johnson.
The Rational Group gave up the fight to purchase the property in August, saying it would only seek monetary relief from the court. As a result, the company has instead partnered with Resorts Casino Hotel in hopes of cashing in on New Jersey’s expected lucrative online gambling market. The company is still awaiting approval from New Jersey regulators before online gambling goes live on Nov. 26.
PokerStars licensing for the Atlantic Club deal has drawn concern from the casino industry, including the American Gaming Association. The trade group has called PokerStars a “criminal enterprise” following a federal lawsuit that included charges of fraud and illegal gambling. PokerStars admitted no guilt in a settlement agreement and has denounced the gaming association’s allegations.
