ATLANTIC CITY - The Tropicana Casino & Resort's parent said today that it might file for bankruptcy protection to prevent defaulting on its loan after the casino was denied a new license last night.
Tropicana Entertainment L.L.C. said its lenders could accelerate the payment schedule on its loans if the New Jersey Casino Control Commission's decision to deny the company a new license were not delayed or reversed by Wednesday. The company, which is an indirect subsidiary of Columbia-Sussex Corp., of Fort Mitchell, Ky., said it might seek bankruptcy protection or take other steps to protect itself.
Commission spokesman Dan Heneghan said it was up to Tropicana to decide if it wanted to file for bankruptcy.
"We are interested in the operation of the casino, which is now in a trust and no longer under the control of Tropicana Entertainment," he said.
A state-appointed trustee took over the operations of the Tropicana yesterday after the commission voted 4-1 to deny owner Columbia-Sussex a license renewal.
The trustee - former New Jersey State Supreme Court Justice Gary Stein - will run the casino and hotel until a buyer is identified by a conservator to be appointed by the commission.
"We will appoint a conservator fairly quickly," Heneghan said today. "Any discussion about potential buyers or the sale process is premature at this point."
Columbia-Sussex attorney Paul O'Gara filed for an appeal of the commission's decision before the New Jersey Appellate Division of Superior Court in Trenton today.
O'Gara unsuccessfully argued for a stay of the commission's order to install the trustee. In filing the appeal, O'Gara said Tropicana needed time to sort out its complicated finances.
"The company is, obviously, looking at all of its alternatives," O'Gara said tonight. "There's a five-day period, and we're exploring those options and looking at the alternatives and hope to reach a resolution toward a disposition of the Tropicana assets."
O'Gara said he had been contacting banks and creditors who financed the purchase of Aztar Corp., the former owner of the Tropicana, in 2006.
"They have certain rights under the credit agreements," he said. "They will make decisions on how to proceed to get to a resolution that is in accordance with what the New Jersey Casino Control Commission has ordered and will make the constituents whole and move the company forward."
A successful appeal "is highly unlikely given the fact that the decision rests on the applicant's ability to demonstrate competent business operating ability and character," gaming analyst Andrew Zarnett of Deutsche Bank AG in New York said in a note to investors today. "It appears the decision of the commission was well-reasoned and supported by evidence."
Tropicana Entertainment said that it intended to repay its senior debt with proceeds of the sale of the casino and that it was also analyzing the potential impact of the commission's ruling on its gaming licenses in other states, including Nevada, where the company owns the Las Vegas Tropicana Casino just off the Strip.
The Tropicana's denial is only the second failed license bid in gambling's 29-year history in Atlantic City.
In addition, the casino was fined $750,000 - the largest monetary penalty ever imposed by the commission - for failing to have an independent audit committee as required by law to act as the casino's internal watchdog.