Revel auction starts slow, resumes Tuesday

The auction of Atlantic City's bankrupt Revel Casino Hotel never really got started Wednesday in New York City before it was adjourned until Tuesday, an attorney for bidder Glenn Straub said.

"They spent six hours privately negotiating with whoever the bidder is that they want to be the winning bid," Stuart J. Moskovitz, the attorney for Straub, said of Revel's legal team. "They wouldn't even tell anybody who it was."

John K. Cunningham, Revel's lead bankruptcy attorney, responded by saying, "We were conducting the auction in accordance with the bankruptcy court's bid procedures. Any allegations about improprieties are unfounded."

The pause was not a surprise to those involved. At a bankruptcy hearing Sept. 15, Judge Gloria M. Burns sought assurance from all parties that the auction would be adjourned at sundown Wednesday to allow participants to observe the start of Rosh Hashanah.

The auction is supposed to resume at 9 a.m. Tuesday, Moskovitz said.

He said he did not know how many bidders were at the auction in the offices of White & Case L.L.P., the law firm for Revel.

The casino, which cost $2.4 billion to build, filed for its second bankruptcy in June. Straub's $90 million bid equals less than 4 percent of the original cost.

When Revel shut down Sept. 2, more than 3,000 people lost their jobs. It is one of four Atlantic City casinos to close this year, after a years-long decline in revenue.

Reuters, citing an unnamed person familiar with the auction, said two last-minute bids were made before the deadline of 4 p.m. Tuesday, one from a party involved in casinos outside of New Jersey and a second from a real estate developer.

A corporate bankruptcy auction is typically a closed-door affair, with lawyers and others running among potential buyers to solicit higher offers, rather than an auctioneer with a gavel in a crowded room.

Delays in the start of a bankruptcy auction are not unusual, as lawyers try to establish a basis to make an apples-to-apples comparison of bids.

In the case of Revel, Straub's bid is particularly strong because it is an all-cash offer and is not contingent on Straub's receiving a license to operate a casino at the property.

Typically, a bid is less desirable if it has conditions or depends on insecure financing.

Cunningham, Revel's attorney, said at the Sept. 15 hearing that he and his colleagues would consider any qualified offers.

If they get a $200 million offer with a casino-licensing contingency, Cunningham said, they would have to weigh how long the licensing process would take against the fact that Revel is burning through $5 million to $6 million in cash a month - about half from property taxes - even after closing. Every day reduces the amount of money left to pay lenders and other creditors.

Ultimately, the property goes not necessarily to the highest bid, but to the "highest and best" bid. Attorneys and investment bankers for the bankrupt company have a great deal of leeway in choosing the winner.

However, they still have to seek approval of their choice from a bankruptcy judge. A hearing for that purpose in the Revel case had been scheduled for Tuesday, but will have to be postponed.

In the case of the Atlantic Club bankruptcy auction in December, the casino's lawyers and investment bankers chose Caesars' and Tropicana's combined bid of $23.6 million over a competing $24.5 million bid.

The higher bid came from companies affiliated with Belinda Meruelo, a Miami Beach, Fla., real estate developer.

Her son, Richard, a real estate developer with interests in South Florida and Southern California, was at a Sept. 15 Revel bankruptcy hearing. He complained that his company's bids were not considered "qualified" in previous attempts to sell Revel in a bankruptcy auction.

At that hearing, Richard Meruelo said he was still interested in buying Revel, but objected to the $3 million breakup fee that would go to Straub if he won the auction. The minimum bid to beat Straub was set by Revel at $94 million and approved by the judge.

A company owned by Richard Meruelo's brother, Alex, tried to buy Trump Plaza last year for $20 million. Carl Icahn, who owns the mortgage on Trump Plaza and Trump Taj Mahal, blocked that deal, saying the offer was too low.