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May. 06, 2008
Copyright © Las Vegas Review-Journal

THE STRIP: Tropicana owner bankrupt

Gaming company says properties will remain open as it seeks to restructure

By ARNOLD M. KNIGHTLY
REVIEW-JOURNAL

The Tropicana on the Strip is one of the properties owned by Tropicana Entertainment.
Associated Press File Photo

The Tropicana's parent company was working to file for bankruptcy Monday but said the Strip hotel-casino and the company's other properties would continue to operate while it seeks to negotiate with creditors.

Crestview Hills, Ky.-based Tropicana Entertainment said after the markets closed Monday that it would file for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Delaware to allow the company to reorganize its debts. It listed $2.8 billion in assets and $3.3 billion in liabilities.

The gaming company has been struggling to pay off debts, stemming largely from its $2.1 billion buyout of Aztar Corp. in January 2007, amid a downturn in the economy and following the loss of its license to operate the Tropicana Atlantic City.

Company President Scott Butera said the company will continue to pay for operations at its 11 properties in the United States and the Caribbean and keep all 11,000 employees on the payroll.

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    • "It is everybody's interest to make sure the properties are vibrant throughout this," Butera said. "So it is clearly business as usual for customers, employees and vendors.

    "It is really a restructuring process between ourselves and our note holders and debt holders. All the people who affect the day-to-day business are going to be paid on time."

    The company will use $67 million in financing from Greenwich, Conn.-based Silver Point Finance and the company's current operational cash flow to pay its operating expenses.

    The gaming subsidiary of nondebtor Columbia Sussex Corp., which is owned and run by hotelier William Yung III, has working to renegotiate its debt, which includes a $960 million bond, a $1.21 billion senior bank note and a $440 million loan on the 34-acre Tropicana on the Strip, for several months.

    "It was inevitable," Wachovia Capital Markets bond analyst Dennis Farrell Jr. said. "Their lenders are looking to stop the erosion of value that's going on within the company and they're trying to get more control of the company, which they will in this process."

    Three weeks ago, the company negotiated a deadline extension through April 30 with holders of a $960 million subordinate bond that went into default when the company lost its New Jersey gaming license in December. The loss of its gaming license forced the company to put the Tropicana Atlantic City up for sale.

    Tropicana Entertainment was granted a second extension through Monday, but was forced to seek bankruptcy protection later that day when it could not get another extension, according to the court documents.

    Butera, a former banker who joined the company in late March, did not know when the company could emerge from bankruptcy.

    "The good news is we're in dialogue with everybody, so we're hoping it's an efficient process," Butera said. "It's in everybody's interest to be an efficient process; it's in no one's interest to be a lengthy process."

    In court papers, Butera decried the decision by New Jersey regulators to wrest control of the Atlantic City Tropicana from the company, saying that led directly to the bankruptcy filing. He laid out a series of problems that befell Tropicana's owners from almost the moment they took over the property on Jan. 3, 2007.

    When it bought Aztar Corp. for $2.1 billion after a heated bidding war, the company unwittingly violated a fundamental principle of business: buying high just before the market fell.

    Using tactics they had successfully employed elsewhere, management began cost-cutting measures, including nearly 1,000 layoffs in Atlantic City, prompting an uproar from unions.

    A slowing national economy made gamblers more cautious about parting with their money, and real estate values plummeted as well. Then credit markets tightened, leaving Tropicana Entertainment "very little margin for error," Butera wrote in court filings.

    The company simply could not afford any significant setbacks, he added.

    Nine of the of the company's 11 properties are in the bankruptcy filing, including the Tropicana on the Strip, the Horizon and the MontBleu in Lake Tahoe, and the Tropicana Express and River Palms in Laughlin.

    The Westin on Flamingo Road is owned by a separate subsidiary of Columbia Sussex and is not affected by the bankruptcy.

    The Tropicana Atlantic City, which is operated by New Jersey officials pending its sale, and a Mississippi property it co-owns are not part of the filing, according to court documents.

    The company announced in March it had reached an agreement on the $245 million sale of the Casino Aztar in Evansville, Ind. That sale, along with the pending sale in Atlantic City and the sale of a casino in Vicksburg, Miss., could generate between $982 million and $1.34 billion, according to analysts.

    "We're still moving forward with those sales and they will be part of the bankruptcy process," Butera said. "It should not have any significant impact but there may be some timing considerations."

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893. The Associated Press contributed to this report.



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    Tom wrote on May 27, 2008 01:42 PM: It's a shame that old established landmarks like the Tropicana are destroyed by problems created by greedy mismanagement and mistreatment of employees which in turn effect customer relations. A simple problem with a simple solution.
    Mr. Trump's comments on May 06, 2008 6:14 p.m. make a lot of sense. How do you bankrupt a gambling company?
    Gambling caters to the most important commodity in the world " PEOPLE " primarily guys who know they are suckers and associate beautiful woman with gambling.
    I know Mr. Trump, who I admire, would not be interested in casino's if it wasn't for beautiful woman. The addiction is both. It's up to you whether the choice is one, the other, or both.
    Someone save the history of this company and it's people. Keep the legacy going.
    Then, invest in Manhattan Real Estate.


    daphane wrote on May 14, 2008 04:59 PM: River Palms is the worst place to work! Nobody cares about anything but getting their bonuses at the end of the year. That means spending as little money as possible so the bonus is bigger. The hotel is falling apart, the housekeeping staff is overworked and under paid, they can't keep employees or guests. The negative comments are all over the internet and that is also driving guests away. The cocktail waitresses and bartenders are paying more for their tip compliance than they make. The buffet is now self serve, and the waitresses are now bussers and also have to abide by the tip compliance, even though they aren't getting any tips. Nobody gets trained properly in ANY department, so the guests get charged wrong and it takes months for them to get their money back. I'm with Paula. I hope we are sold soon!


    Paula wrote on May 14, 2008 07:27 AM: As the old saying goes " What goes around comes around". Yung is a Moron! I too live in Laughlin, and work at the River Palms, it is the ARM PIT of Laughlin because Yung doesn't care. We can only hope that Columbia Sussex is forced to sell us, and then throw out some of the untrustworthy morons that are considered "Management". Keep your fingers crossed fellow employees, there may be light at the end of the tunnel.


    Donald Trump wrote on May 06, 2008 06:14 PM: Have these people no shame? How do you bankrupt a gambling company? Everybody knows that gambling is for suckers, so how hard is it to take their money and post a profit?

    I have always been addicted to beautiful women...no gambling for me. They should have invested in Manhattan real estate...they would not be broke and bankrupt.


    Regards,

    Donald


    Alan wrote on May 06, 2008 04:17 PM: GREED, GREED, GREED Fire 75% of employees and put their paycheck into my bonus. SEEYA SEEYA dont look back.


    American Gaming Guru wrote on May 06, 2008 01:37 PM: Columbia Sussex has made a real mess of the Tropicana assets. It is very unfortunate.


    simboybjk wrote on May 06, 2008 11:27 AM: the Tropicana just needs to be updated according to the new trends in LV.

    if they can turn themselves into a quality budget hotel (not a crappy one like now!) people who are fed up with the high prices of the new resorts will lure in and make that place profitable again. MGM/Mirage handles that very well with owning some quality hotels and also budget hotels like excalibur.

    Theres no need to tear down the place and build another very expensive mega resort. Tropicana can adresse to a certain population that likes the old vegas feel right on the centre of the strip.

    Simboybjk


    Rev Wright wrote on May 06, 2008 09:35 AM: The Chickens have come home to Roost


    dodgerchuck wrote on May 06, 2008 09:29 AM: spin,spin, spin mr butera.maybe u should put the blame 4 the companies demise where it really lays,the mgrs/owners of the ac trop who signed off on the mgmt direction at the time the troubles began.


    Gary wrote on May 06, 2008 09:24 AM: The sooner Columbia Sussex is out of Nevada the better we all will be.


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