The company that owns Revel, the lavish yet financially troubled Atlantic City casino that opened just 10 months ago, announced Tuesday night that it is filing for bankruptcy protection.
In a statement just before 8 p.m., Revel AC Inc. said it had "reached an agreement with a majority of its lenders to significantly reduce its debt through . . . a prepackaged Chapter 11 bankruptcy filing."
The move is intended to provide Revel with about $250 million in debtor-in-possession financing, with about $45 million in new money commitments, according to the statement, and about $205 million in pre-petition debt.
No taxpayer funds will be used to finance the restructuring, the company said. Revel, built at a cost of $2.4 billion, had received more than $300 million in assistance from the State of New Jersey, including $261 million in state tax credits, as well as the broad endorsement of Gov. Christie, who called the casino "a game-changer for Atlantic City" when it opened April 2, 2012, at the northern end of the Boardwalk.
Tuesday night, the casino said that it intends to complete the financial restructuring early this summer, and that the bankruptcy was not expected to affect Revel's guests, employees, or vendors.
"Throughout the restructuring, Revel intends to continue normal business operations," the company statement said. "All services, dining, scheduled entertainment, programming, and events will move forward without change or interruption, and employees and vendors will be paid in the normal course of business."
The bankruptcy filing comes as no surprise. Every month since its opening, Revel, the most expensive casino ever built in New Jersey and the first to have a fully nonsmoking gambling hall, has finished near the bottom for total casino revenue among Atlantic City's dozen venues.
In January, it finished in 11th place, generating less than $8 million in total casino revenue.
Revel had amended its revolving line of credit at least three times since the summer, spending money at a fierce clip while bringing in less than half the $30 million a month that Wall Street analysts said it needed to sustain its massive 6.3 million-square-foot operation.
The latest cash infusion, $150 million approved in late December, was supposed to help Revel get through 2013, or at least to the peak summer months, when more than half of Atlantic City's total annual revenue is generated. The upscale casino planned to add a high-end slots lounge and new, less expensive restaurants to attract a wider range of customers.
Earlier this month, however, credit-rating agencies said Revel's dismal finances were "unsustainable," and the casino announced early last week that it had hired a new law firm, Kirkland & Ellis L.L.P.; investment firm Moelis & Co.; and restructuring adviser Alvarez & Marsal, all of whom specialize in corporate restructuring and prepackaged bankruptcies.
A prepackaged bankruptcy has parties agreeing to financial terms before the bankruptcy filing is made, speeding up the exit process. With debtor-in-possession financing, Revel management retains control.
Revel is carrying a debt load of $1.2 billion and not generating even enough to pay off interest on its bonds, analysts said. At the same time, it must burn through cash to keep the lights and water on to support its 1,400-room hotel and 130,000-square-foot gaming floor.
Chief executive Kevin DeSanctis, who has consistently defended Revel's philosophy of emphasizing its nongaming attractions, tried to put the best spin on the prepackaged bankruptcy filing Tuesday night. DeSanctis had shepherded the five-year development of the megacasino. The project was delayed two years as developers sought full financing to get it built.
But when Revel finally opened in spring 2012, critics and customers panned its design and its pricey restaurants and shops. It seemed never to gain the necessary traction among the gambling public, partly because of its nonsmoking policy.
"Today's announcement is a positive step for Revel," DeSanctis said in the statement. "The agreement we have reached with our lenders will ensure that the hundreds of thousands of guests who visit Revel every year will continue to enjoy a signature Revel experience in our world-class facility."
Michael Drewniak, Christie's press secretary, issued a statement on the governor's behalf:
"We are committed to the resurgence of Atlantic City, the tourism district, and the many efforts currently under way to bring world-class attractions and entertainment to the city. A rejuvenated Revel will remain an integral part of that landscape, as it continues full operations as a premiere hotel, gaming and top-flight entertainment hub for the city, in addition to employing more than 2,000 people," Drewniak said. "Most importantly, none of those things that make Revel among Atlantic City's highest-profile attractions will change, as Revel uses this new financial flexibility and the continued backing of its investors to grow the business and be part of Atlantic City's expansion."
Philadelphia-based bankruptcy consultant Robert Katz said: "Even with the prepackaged Chapter 11, Revel still has another fundamental issue - that is, even if they fix the capital structure, being in the bottom quadrant of [casino] revenue, they still have to sustain a certain level of revenue to service most levels of debt.
"They really need to reevaluate how they attract or are not attracting customers, so that they can create a vibe and activity that appears to be lacking a bit, that will drive gaming customers to the property on an ongoing basis."