U.S. Bankruptcy Judge Gloria M. Burns on Friday approved Revel AC Inc.'s request to terminate the deal to sell the closed Atlantic City casino to Brookfield Asset Management Inc. for $110 million.
Next up for the $2.4 billion Revel, which opened in April 2012 and never turned a quarterly profit, is a Jan. 5 hearing for the judge to consider a sale to the backup bidder, Florida investor Glenn Straub, for $95.4 million.
Neither Brookfield nor Straub - in Key West, Fla., for an unrelated court hearing - were represented at the hearing or on the phone participating in the hearing in Camden.
The termination means Brookfield will lose its $11 million deposit. The Toronto real estate investment firm had $4.4 billion in net income in the 12 months ended Sept. 30. Brookfield, which had said it intended to reopen Revel as a casino, abandoned the deal last month after failing to reach terms with municipal bondholders owed $118.6 million for the central utility plant that heats, cools, and provides electricity to the casino and hotel.
The utility plant is owned by ACR Energy Partners L.L.C., a joint venture of South Jersey Industries Inc. of Folsom and DCO Energy L.L.C. of Mays Landing, N.J.
A law firm representing the trustee for the bondholders said in a filing Thursday it had engaged "in substantive discussions with Brookfield and made reasonable but meaningful concessions that would have allowed the Revel to reopen its operations under Brookfield."
John K. Cunningham, Revel's lead bankruptcy attorney, took issue with that characterization at Friday's hearing. Cunningham, of White & Case L.L.P., said Revel officials met with bondholders in July to discuss proposed terms on the utility plant debt that would have enticed potential buyers.
"They wanted to engage in a game of chicken with any buyer we ultimately selected," Cunningham told the judge. Cunningham disputed the bondholders' characterization of talks with Brookfield. "From what I know from talking to Brookfield, I don't believe any of their negotiations were meaningful or reasonable," Cunningham told the judge.
Now, the bondholders are back to square one with Straub. Cunningham said Straub notified Revel he would reject the utility-plant contract, which calls for $1.7 million monthly debt and equity payments, on top of variable costs for energy. Straub's bid for Revel was not only for significantly less money than Brookfield's offer, it's also weaker in other ways. Straub would pay $91 million at closing, plus $1.1 million for four years. Brookfield had agreed to pay the administrative costs of the bankruptcy after a certain point. There's no such provision in the Straub agreement, which means there will be less money for creditors to fight over.