Atlantic City Hilton Drops Sale Bid, Will Stay Open
The owners of ACH, the casino formerly known as the Atlantic City Hilton, have reached a deal to avoid foreclosure on the struggling gambling hall, and agreed to pump $15 million into it to keep it afloat.
The New Jersey Division of Gaming Enforcement confirmed Thursday that the deal will let lenders foreclose on two casinos in Mississippi that are owned by ACH’s parent company, the Los Angeles hedge fund Colony Capital. The lenders will assume ownership of Bally’s Tunica and Resorts Tunica, and will wipe out the mortgage debt for ACH.
The deal also calls for an additional infusion of $9.3 million in cash for the casino when lenders release insurance proceeds stemming from an August 2009 flooding claim at the Atlantic City casino.
All told, the deal reached Wednesday will pump at least $24.3 million in new funds into the casino, which has been on life support for more than two years amid a fruitless effort to find a buyer.
“This agreement culminates a long period of uncertainty for ACH employees and the City of Atlantic City,” said David Rebuck, acting director of the New Jersey Division of Gaming Enforcement.“We are pleased with the efforts of all the parties in reaching this agreement aimed at allowing the casino to sustain its high level of operations while maintaining the hundreds of jobs of persons employed by ACH.”
There were 1,925 people working at ACH at the beginning of October, according to the most recent statistics available. ACH stopped paying its loans in 2009 and has been considered at great danger of closing.
In September, the gaming enforcement division wrote a report to the New Jersey Casino Control Commission expressing concern over ACH’s financial stability. The casino posted a gross operating loss of nearly $11 million in the first six months of this year, and its monthly casino revenue continues to plunge.
In September, ACH took in $12.1 million, a decline of 11.3 percent over its take from September 2010. For the first nine months of the year, ACH has taken in $114.8 million, down 11.6 percent from the same period a year ago. Only Trump Marina Hotel casino, which became the Golden Nugget Atlantic City in May, and Trump Plaza Hotel Casino posted worse showings since the beginning of this year. But their parent companies are in much better shape and considered better able to weather the challenges facing Atlantic City, including fierce competition from casinos in neighboring states.
Hilton Hotels & Resorts ended a franchise agreement in July that gave the casino the right to use the Hilton name. According to financial documents filed with the state at the end of June, ACH had owed at least $414.6 million to its lenders, including U.S. Bank National Association and J.P. Morgan Chase Bank.
Colony borrowed money in October 2006 for its two Mississippi casinos, secured in part by what was then called the Atlantic City Hilton. The lenders will foreclose and become the new owners of those two Mississippi casinos.
The deal is expected to close on or before Nov. 30. The owners are asking the state Casino Control Commission to declare that the casino now has the financial stability, integrity and resources to keep operating. That request will be heard at the commission’s Nov. 16 meeting.
Colony bought the Hilton for $513 million in 2005 as part of a $1.24 billion deal that netted them four casinos in New Jersey, Mississippi and Indiana. That, it turns out, was near the height of the market, which came in 2006.
Late that year, the first of what would ultimately become 10 casinos in neighboring Pennsylvania opened and began siphoning Atlantic City’s customers. Atlantic City’s casino revenue peaked in 2006 at $5.2 billion; it has since fallen to $3.6 billion at the end of 2010.
The sale price of Atlantic City casinos has plummeted as well. When the Tropicana Casino and Resort was stripped of its license in December 2007 because of the poor performance of its owners at the time, a state-appointed conservator expected to sell it for just under $1 billion. Instead, it was swapped in bankruptcy court for $200 million of deeply discounted debt, which investor Carl Icahn amassed for pennies on the dollar.
Resorts Casino Hotel, which also was owned by Colony Capital, was sold last December to Dennis Gomes, a veteran casino executive, and New York real estate mogul Morris Bailey for $31.5 million — far less than the $140 million Colony paid for it less than 10 years earlier. And in May, Trump Marina, now the Golden Nugget, went for just over 10 percent of the $316 million it nearly sold for in 2008.