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New Jersey Casino Files For Bankruptcy Ten Months After Opening; No Taxpayer Funds Will Be Lost This Time

Tyler Durden's picture




 

If it seems like it hasn't been even a year since the latest Atlantic City casino, this one with the surreal ads showcasing Revel Atlantic City, opened up, it is because that is exactly the case. Ten months to be precise. And just as quickly as it came, just as quickly did it file for bankruptcy. Moments ago, the company issued a press release that it would engage in a debt-for-equity prepack (with Moelis, K&E and A&M all advising) Chapter 11 which will be completed over the summer. The biggest losers here are not so much the original owners of Revel Entertainment Group, Morgan Stanley which three years ago decided to walk away from its entire $932 million sunk investment in the bankrupt hotel (instead of spending another billion to complete it), but the people of New Jersey, who just lost another investment opportunity as some $260 million in the tax incentives that were supposed to help the project along will never reach their intended target. From the WSJ:

[Revel] received a boost from the state of New Jersey, which over 20 years will send back $261 million in taxes from the project under an economic-redevelopment initiative. Most of that money will be used by Revel to spruce up the scruffy neighborhood and boardwalk around the casino. About $70 million will go into an account that can be used to pay initial interest on the mezzanine loan if the project doesn't meet projections.

 

The $70 million piece was a key late addition that helped secure the mezzanine funding, according to people involved in the financing process.

The other losers here are the unnamed debt holders who in February 2011 also injected $850 billion in first-lien and $305 million mezz loans which would eventually become 85% of the equity - the CEO of the firm refused to discuss whose these investors were, referring to them only as a “consortium of institutional investors.” JPMorgan acted as advisor for Revel in connection with the debt raise. Nearly a year later, JP Morgan advised lenders to sink another $150 million in good money after bad: "The casino resort said it amended its agreement with JP Morgan Chase Bank to provide for additional money to help pay down existing debt and to fund operations. Most of it consists of a new $125 million loan."

The continuation of the abandoned investment was the brainchild, and pride and glory of one Chris Christie who then said "the $2.4 billion Revel is one of the most spectacular resorts he's ever seen and expects it will motivate other Atlantic City casinos to revitalize their properties. "I think that one of the things that Revel will be is a catalyst for additional modernization and investment by the other casinos to say, listen, if we grow more people here coming to the region and we're offering something that looks nice further down the boardwalk, maybe people will want to look there as well." As it now stands, the Revel will only be a catalyst for further bankruptcies as industry after industry finds out what a tapped out consumer with no access to $1.8 trillion in excess reserves truly means.

The other losers are the usual suspects: unions.

While construction unions have been backers of the project, the hospitality-workers union and conservative groups have criticized the state help. Unite Here, which represents workers at Atlantic City's casinos, has complained that the project could force older casinos to close, which would mean more laid-off workers.

 

Mr. DeSanctis on Thursday said the project hoped to instead expand the market by appealing to business groups and leisure travelers who aren't visiting Atlantic City these days.

So much for that. As for the fresh start capital structure, the lenders will roll some $205 million in pre-petition debt into a DIP, and provide a fresh $45 million in new capital, as yet another batch of good money is thrown after bad money that once was good money also thrown after bad, and so on.

As part of the restructuring, certain of Revel`s lenders will provide approximately $250 million in debtor-in-possession financing (DIP), approximately $45 million of which constitutes new money commitments and approximately $205 million of which constitutes prepetition debt.

But the funniest part from the pre-packaged bankruptcy press release is the following line:

No tax payer funds will be used to finance the restructuring.

Ladies and gentlemen: we have just found the first insolvent Wall Street casino (literally) that did not get a taxpayer bailout.

And now: the surreal Revel ad as promised.

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Tue, 02/19/2013 - 22:52 | 3258264 Yen Cross
Yen Cross's picture

   I'm working your links! I'll get junked for it.  It is an absolute travesty, the way financial burdens are being put on our young ones! My junkster hates children? Monedas you need too try harder!

 

Tue, 02/19/2013 - 22:59 | 3258289 IridiumRebel
IridiumRebel's picture

I agree Yen. These fuckers are heartless. It will come back on them. I got my daughters back and I am teaching my wife about the pitfalls of modern finance as I am 10 years older than her. Don't fuck with kids. I'll destroy a motherfucker if they try it.

Tue, 02/19/2013 - 23:06 | 3258313 Yen Cross
Yen Cross's picture

 I'm gen-x Iridium. I am not a self serving boomer!  Thanks for the kind comment.

Wed, 02/20/2013 - 01:38 | 3258575 IridiumRebel
IridiumRebel's picture

I'm gen x too.

Wed, 02/20/2013 - 01:39 | 3258576 IridiumRebel
IridiumRebel's picture

I'm gen x too.

Tue, 02/19/2013 - 22:55 | 3258280 adr
adr's picture

Ha ha ha sad. Yeah right. BULLSHIT.

The kids of parents pulling in $50k a year combined are living in poverty. The kids of the welfare class have Christmas and birthdays that rival those in the Hamptons.

Ever seen the shopping cart of a middle class 34 year old with two kids? Generic peanut butter and whatever else is on sale. If she's lucky the bottom of the cart may be covered.

Then you look over at the 300lb fat fuck welfare queen with six kids running around. Shaniqua just knocked over the soup display, CLEANUP ON AISLE FOUR. Jerome just stole the broom from the corner and is playing hockey with the cans. You can barely see Chaquese on the mobile cart filled to the brim while dragging another full cart behind her.

A cursory glance shows you some filet, barbeque ribs, a mess of bacon, maybe some crab legs. Each kid gets three boxes of Oreos.

Poverty ain't having six overweight kids, a 50" TV with two Xbox 360s, and a three year old Chevy Equinox that gets to park in a handicap spot.

Wed, 02/20/2013 - 04:34 | 3258705 bunnyswanson
bunnyswanson's picture

What you fail to acknowledge is the fact that the government has created this low class, by restricting ability to introduce enough material fast enough to stop the chain of events that always ! always~ occurs when children are born into a broken home.  The rent itself ensures they grow up amongst the worst of humanity.  The neighborschools are a war zone.  The misery is untolerable and their medication is an arm's length away - mind-altering substances, which are readily available thanks to the illegal drug trafficing which is so prosperous, the money untaxed, the drug lords live in palaces and the bribes are too good to refuse.

Drugged, broken people don't vote mutherfucker and that is the goal.

Tue, 02/19/2013 - 22:44 | 3258250 401-Kulak
401-Kulak's picture

They should have opened a bank instead - much better odds for the house.

Tue, 02/19/2013 - 22:48 | 3258266 wcvarones
wcvarones's picture

Who owned the bonds?

Was it those shitheads at CalPERS again?

Tue, 02/19/2013 - 22:49 | 3258269 Venerability
Venerability's picture

Flipping channels, I believe I heard Larry "Emperor Dollah" Kudlow say:

1. China is no longer buying ANY Treasuries, and

2. Fed stimulus is likely for at least another coupla years.

Yes, that was THE Larry Kudlow!

Meanwhile, elsewhere in Fantasyland - excuse me, CNBC - we were treated to one of the Tiny Terror's periodic "I have never recommended a Gold stock and never will" speeches.

Pretty much every single time he makes one of these speeches - usually three times a year, sometimes only twice - we get a surprise rally in the PM stocks within days, sometimes hours, sometimes minutes.

In fact, some of us who are veterans of the sector first entered it on Tiny Terror's FIRST "Gold stocks are all worthless and should be converted into Starbucks or Chipotle outlets" speeches way back whenever it was.

Some seem to be saying "this time is different," but generally, that's not true.

Even last year, which was horrendous because of the Indian Jewelers' Strike, lasting an entire quarter, we managed to put in our first sector bottom right around here, i.e. February 20? very close, anyhow. (The second one usually occurs like clockwork around July 10th.)

So let's see if Tiny performed his usual contrarian magic tonight.  

We still really need an HGNSI installment, though. Is Mr. Hulbert ill?

Tue, 02/19/2013 - 22:49 | 3258271 Michelle
Michelle's picture

Just another failed casino story, that's all the U.S has become, one big casino. Wall Street got their money grab too.

 

Wed, 02/20/2013 - 10:05 | 3259041 SamuelMaverick
SamuelMaverick's picture

Funny how a corporate run casino with state subsidies goes bankrupt twice, but all the Indian casinos in Connecticut and Upstate NY are printing money.  

Tue, 02/19/2013 - 22:50 | 3258274 W74
W74's picture

Oh and fuck the 51.9% of you (based on 18.74% total voter turnout) who voted for a half dozen more Casinos in the tiny state of Maryland.  I can't wait for the boxy monstrosities to crash and burn after the novelty burns off. 

The first one that went up (in bumfuck Cecil county bordering both Delaware and Pennsylvania but which I would have to pay a $5 toll to even get to and another $5 to get back or otherwise take an additional 2 hours) has already lost more than 60% of it's attendence since the opening months.  I hope policy decisions weren't made using projections based on those numbers.

Tue, 02/19/2013 - 23:25 | 3258358 MedicalQuack
MedicalQuack's picture

Congress Needs a Bigger Brain–Restore the Office of Technology Assessment And Truly Assess What is Useful And Remove The Algo Duping Permeating In Government–Fantasy Perceptions That Are Not Real Can Be A Dangerous Thing, this is from the Sunlgiht Fouddation and this is one thing they really are missing and need help in DC.I like the little old lady giving the talk too, she gets it.

http://ducknetweb.blogspot.com/2013/02/congress-needs-bigger-brainrestor...

We have had all this talk and transaction algos still moving money to the 1%.  I keep telling all nothing happens until you change the parameters of the execution of the code, so talk all they want.  Create laws with legal mumbo jumbo, and corporate USA creates an algorithm that finds a loophole and works within it. 

My campaign here to license and quarter excise tax all data sellers and require a federal site to have all disclosed what kind of data they sell and to who.  Pay attention to this as your article states above about no access to $1.8 trillion.  Walgreens made short of $800 million in 2010 selling data only!  Is this a wake call to allow you to picture the billions being made?  It just goes into the $1.8 trillion cash file. 

There has to be a starting point to start moving some money back and this will do it and shoot the pot of gold might even be bigger than we all think.  Companies don't expand and build factories and create jobs when they can let some data mining algos do the work with no risk.  The problem is now we have truckloads of flawed data as with this money making selling rage they query and put all kinds of crap together.  Data that doesn't even relate and spin the marketing and sold! 

When the data is sold they don't care who buys it and then we have the next step with what data are they going to query and relate it to and what kind of analytics will they sell...like a snowball it just rolls and flawed data increases and hurts us.

Seriously this is like a smaller version of the mortgate scam business but affects a lot of other businesses out side the banks and of course the banks are in there making their billions selling data too, so everyone who sells data, should need a license and pay a quarterly excise tax and disclosed.  Make that license healthy too as if we don't we will still be unbalanced too with tangibles and intangibles.  Tangibles create jobs.

http://ducknetweb.blogspot.com/2013/02/time-has-come-to-license-and-tax-...

Tue, 02/19/2013 - 23:26 | 3258365 whoknoz
whoknoz's picture

As part of the restructuring, certain of Revel`s lenders will provide approximately $250 million in debtor-in-possession financing (DIP), approximately $45 million of which constitutes new money commitments and approximately $205 million of which constitutes prepetition debt

rather...$250 million financed by dipshit debters-in-possession of anything but their sanity...

Tue, 02/19/2013 - 23:32 | 3258379 Mister Minsk
Mister Minsk's picture

Where's Sausage Fingers?

Wed, 02/20/2013 - 00:37 | 3258491 Schmuck Raker
Schmuck Raker's picture

"Our version of Burlesque"...

TINY TITTIES!?!

A better deal for the taxpayers - than Solyndra.                yay.

Wed, 02/20/2013 - 04:18 | 3258697 sodbuster
sodbuster's picture

The other losers here are the unnamed debt holders who in February 2011 also injected $850 billion in first-lien and $305 million mezz loans<

Really? A nearly trillion $ casino? That's gotta be $850 million.

 

Wed, 02/20/2013 - 06:53 | 3258766 TNTARG
TNTARG's picture

It seems it's a trend...

http://www.bbc.co.uk/news/uk-21515907

UK: "Campaign reveals one in five children living in poverty"

Aren't those banksters lovely?

 

Wed, 02/20/2013 - 07:53 | 3258803 Downtoolong
Downtoolong's picture

JPMorgan acted as advisor for Revel

What kind of advice could they possibly be giving (other than you're out of your mind) after Morgan Stanley already walked away?

F^&cking whores.

I can't believe Trump isn't behind this thing either. This is soooo his kind of deal.

 

Wed, 02/20/2013 - 08:20 | 3258819 Tom.the.Bomb
Tom.the.Bomb's picture

 

Construction of the resort cost $2.4 billion.[16] Global Financial company Morgan Stanley, the owner of 90% of Revel Entertainment Group,

Wed, 02/20/2013 - 08:18 | 3258817 Tom.the.Bomb
Tom.the.Bomb's picture

 

Maybe not “taxpayer” owned… but most assuredly 401k suckers owned.  Morgan Stanley owns 90% of Revel Entertainment.  Vanguard, Fidelity ect owns Morgan Stanley via 401k suckers.  As is every new strip mall type stores opening around here (next to the vacant space next door).  Someday things will go “Pop”.  Will probably be (fake news) blamed on a War or something.  I know better, thanks ZH contributors !!!

Wed, 02/20/2013 - 08:36 | 3258855 Colonel Walter ...
Colonel Walter E Kurtz's picture

I think we are going to see more of this with every State government trying to cash in on the casino gravy train. The law of supply and demand also applies to casinos and I think we are reaching the saturation point.

Here in Ohio, surprise...surprise, our 4 casinos are going to be 900 million short of the projected tax revenues they projected/promised over a two year time frame. But it does not matter to the casinos here, they still enjoy their monopoly status.   

Wed, 02/20/2013 - 10:19 | 3259071 Downtoolong
Downtoolong's picture

I love that guy in the video who’s title is “President, Vibrant Development”. How do I get that job?

Unfortunately, the only way this casino will ever survive is just like all the rest in Atlantic City. Forget the fancy restaurants, swimming pools, spas, and entertainment. They’ve got to bus in enough middle aged women with big bouffant hair and big asses to sit and pull the $5 slots until their Social Security check is gone.  Then the state can afford to spend another $10 million a year as a public service producing ads advising where they can seek counseling for a gambling addiction.  

Wed, 02/20/2013 - 10:21 | 3259074 Fix It Again Timmy
Fix It Again Timmy's picture

Instead of building those monstrosities....Yo, Chris dude, make pot legal - money will flow in without so much as laying a brick..

Wed, 02/20/2013 - 10:22 | 3259079 Freewheelin Franklin
Freewheelin Franklin's picture

After they finished the exterior, and ran out of money and began looking for financing to complete the interior, I said they should just turn it into public housing.

 

Looks like I may have been right.

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