Who Can Save Revel?

November 14, 2013
Who Can Save Revel?

Revel is considering “strategic alternatives” that may include a sale or second bankruptcy. The luxury resort has struggled to find an identity in a market that was declining long before its grand opening. Revel attempted to be a resort with a casino when the other 11 Atlantic City properties are traditional gaming establishments.

Revel exited bankruptcy earlier this year.  The company converted about $1.2 billion of its $1.5 billion debt into equity to its former creditors.  The lenders acquired 82 percent of the company during the process.

There is no doubt that Revel is an immaculate property, especially for Atlantic City. This by itself has not been able to draw gamblers to the resort. Revel is not owned by an established casino company. The lack of a database of casino players hurts Revel’s ability to market to gamblers.

Many players complained about the lack of comps and player rewards when Revel first opened. It seems this has improved lately but many players had already drawn a negative perception of the resort. It also proved to be extremely difficult to draw loyal players from other properties.

A no smoking policy was dropped and a loss rebate program was offered in an attempt to draw players to Revel. While there has been some improvement in revenue, it may have been too little too late.

How Would a Revel Sale Proceed?

Revel could find a buyer before a bankruptcy. Another scenario involves Revel going into bankruptcy again. Potential buyers could acquire the company’s assets without having to deal with its debt. The best legitimate offer wins and the debt holders walk away with any cash generated from the sale. A second bankruptcy would likely be a final chapter in a business deal that investors would rather forget.

What Companies Might be a Good Fit for Revel?

It does not appear that any existing operator in Atlantic City would be a good fit for Revel. Caesars Entertainment already owns four Atlantic City properties. There have been rumors that Showboat has been on the market for years. Caesars Entertainment’s debt load makes acquiring a luxury property even less likely.
Boyd Gaming and MGM Resorts own Borgata in a 50/50 partnership. Boyd Gaming carries about $4.3 billion in debt. MGM Resorts carries $13 billion in debt. MGM Resorts also needs to work out issues with its New Jersey license before expanding in the market.

Atlantic Club is out of the question as it is up for sale. Golden Nugget does not operate two properties in any other market.

Trump Plaza attempted a sale earlier this year that eventually fell through because Carl Icahn, owner of the mortgages involving both Atlantic City Trump properties, refused to sign off on the deal. Carl Icahn also leads the ownership of Tropicana in Atlantic City. Would the billionaire be willing to invest on a fourth Atlantic City property? He is a savvy businessman and anything is possible if the price is right.

Resorts is owned by DGMB Casinos. It was purchased for $35 million. Resorts is the only casino owned by the company.

Out of Market Companies

Penn National Gaming’s name has been thrown around as a potential buyer of Showboat. It seems that Penn Gaming’s Chairman Peter Carlino feels otherwise. During an earnings call last week, he told investors Atlantic City was “O-V-E-R” and had other negative comments about the market.

Wynn has been a name that has been thrown around as being interested in the Atlantic City market. Revel would go along with the company’s luxury brand. Wynn has also expressed an interest in New Jersey’s online gaming market. Wynn reportedly acquired the rights to one of Caesars Entertainment’s licenses. This would make owning a brick and mortar casino in Atlantic City unnecessary. Wynn recently announced that the company would not be building in Pennsylvania, blaming the New York casino vote, which is certain to hurt Atlantic City.

Las Vegas Sands owns a Pennsylvania casino in Bethlehem. It competes directly with Atlantic City and there is no reason to think the company is interested in entering the Atlantic City market. Once again, if the price is right there may be a deal.

2Up Gaming raised $330 million in financing to buy an Atlantic City casino. There were previous rumors that the group would acquire the Atlantic Club. That never happened. It is impossible to know what Revel might sell for but 2Up Gaming could potentially be a bidder in a Revel auction.

There is no telling which company may ultimately own Revel.  There is no doubt that it will be for just a fraction of its $2.4 billion construction price.

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