Atlantic Club Casino Files for Bankruptcy Protection
The saga of Atlantic City’s Atlantic Club Casino Hotel continued today with news that the troubled casino has filed for Chapter 11 bankruptcy protection. The Atlantic Club’s filing, according to a Wall Street Journal report, is likely part of a plan to put the ailing casino up for public auction.
The Atlantic Club and present owner Crown Colony LLC have listed an indeterminate amount of debt in their filings, somewhere between $10 and $50 million, and are expected to use a $15 million influx from an unnamed hedge fund to continue operating during the bankruptcy proceedings, which are expected to conclude with the public auction. That $15 million would be included in the final auction price.
Also needing a white knight is a $32 million hole left by Crown Colony LLC in its employee pension plan, which left the plan underfunded by that amount in recent months. That disclosure came during the court battle between the Atlantic Club and one-time suitor PokerStars, which had attempted to buy the casino under its Rational Holdings US name and which paid $11 million of the announced $15 million purchase price before Atlantic Club backed out of the deal — and kept the $11 million paid by Stars at that point — on a paperwork technicality. A legal action brought by Stars to recover the $11 million was brought by Stars, and though initially ruled in favor of the Atlantic Club was quickly appealed and remains in the New Jersey courts.
As noted by Diamond Flush, one of the incentives for the Atlantic Club and Crown Colony to back out of the Stars deal was the passage of New Jersey’s online gambling legislation, which continues to offer the promise of rejuvenated revenue for New Jersey’s lagging casino industry. Yet even though several outside interests have expressed an interest in buying an existing an existing New Jersey casino, since only 12 exist, and having a land-based presence is a prerequisite for launching online services in the state.
Among the potential suitors is a partnership between British firm 2UP Gaming and American business MidOil USA, which according to a CalvinAyre report claims to have a corporate sugar daddy in waiting, an Asia-based firm willing to invest as much as $335 million to enter the New Jersey (and hence the United States) online market. No firm details exists, but CA has speculated that the firm may be Malaysia-based Genting, which also has strong UK ties. The 2UP/MidOil partnership would be expected to make a bid for the Atlantic Club property.
This isn’t the first time that the troubled Atlantic Club has sought a financial savior. Bedeviled by the twin anchors of the sagging New Jersey gambling market and being an off-Boardwalk location to boot, the Atlantic Club (once known as the Atlantic Club) has exchanged hands several times in recent years. The Atlantic Club had survived only by catering to locals, but even that approach had a narrow future.
In 2009, Crown Colony and Resorts International, which operated both the Atlantic Club and the nearby Resorts International Atlantic City, defaulted on promissory notes for both casinos, each for more than $300 million. The Resorts International AC property was eventually sold off, being run today by the Mohegan tribal nation, which recently and separately contracted with PokerStars for online software services in the new New Jersey online gambling market.
Assuming that PokerStars eventually wins approval from New Jersey regulators, which is most definitely not a given, then PokerStars, with or without its Mohegan partnership, might even have a second chance at obtaining the Atlantic Club property. Such an outcome would be contingent upon the resolution of its ongoing legal battle with the Atlantic Club and Crown Colony, along with the necessity of placing the highest winning bid. Nonetheless, there’s a thin chance that the strange story of the Atlantic Club may go full circle in the months ahead.
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