New Jersey casino regulators say they're concerned about the financial stability of ACH, a development that could ultimately lead to hearings on whether the casino's license should be revoked.
But regulators are moving cautiously, wary of putting too much pressure on the struggling casino that could persuade its owners, Los Angeles-based hedge fund Colony Capital LLC, to simply close it and throw more than 2,000 employees out of work.
The state Division of Gaming Enforcement wrote a report to the New Jersey Casino Control Commission expressing concern over ACH's financial stability, DGE spokeswoman Lisa Spengler told The Associated Press. Dan Heneghan, a spokesman for the casino commission, said his agency received the report on Sept. 14.
The DGE "is closely monitoring the situation," Spengler said.
One of the key requirements for a casino to operate in New Jersey is the ability to adequately finance its operations.
The Hilton stopped paying its mortgage in July 2009 and has been seeking a buyer without success since January as a way to fend off foreclosure. It posted a gross operating loss of nearly $11 million in the first six months of this year, and its monthly casino revenue continues to plunge.
Last month, the casino took in $12.1 million, a decline of 11.3 percent over its take from September 2010. For the first nine months of the year, ACH has taken in $114.8 million, down 11.6 percent from the same period a year ago. Only Trump Marina Hotel casino, which became the Golden Nugget Atlantic City in May, and Trump Plaza Hotel Casino posted worse showings since the beginning of this year. But their parent companies are in much better shape and considered better able to weather the challenges facing Atlantic City, including fierce competition from casinos in neighboring states.
According to financial documents filed with the state at the end of June, ACH owes $414.6 million to its lenders.
Both Owen Blicksilver, a spokesman for Colony Capital, and Nicholas Ribis, the casino's CEO and a minority partner in it, declined to comment Wednesday.
Hilton Hotels & Resorts ended a franchise agreement in July that gave the casino the right to use the Hilton name. And the Press of Atlantic City reported last month that an unfunded $25 million pension liability for Hilton workers would have to be assumed by a buyer, according to a letter from the National Retirement Fund to the casino that the newspaper obtained.
Colony bought the Hilton for $513 million in 2005 as part of a $1.24 billion deal that netted them four casinos in New Jersey, Mississippi and Indiana. That, it turns out, was near the height of the market, which came in 2006.
Late that year, the first of what would ultimately become 10 casinos in neighboring Pennsylvania opened, and began stealing away Atlantic City's customers. Atlantic City's casino revenue peaked in 2006 at $5.2 billion; it has since fallen to $3.6 billion at the end of 2010.
The sale price of Atlantic City casinos has plummeted as well. When the Tropicana casino and resort was stripped of its license in December 2007 because of the poor performance of its owners at the time, a state-appointed conservator expected to sell it for just under $1 billion. Instead, it was swapped in bankruptcy court for $200 million of deeply discounted debt, which investor Carl Icahn amassed for pennies on the dollar.
Resorts Casino Hotel, which also was owned by Colony Capital, was sold last December to Dennis Gomes, a veteran casino executive, and New York real estate mogul Morris Bailey for $31.5 million - far less than the $140 million Colony paid for it less than 10 years earlier. And in May, Trump Marina, now the Golden Nugget, went for just over 10 percent of the $316 million it nearly sold for in 2008.
Regulators would not release the gaming enforcement division's report, saying it does not legally become a public document unless it is introduced into evidence at a public hearing. None has been scheduled, Heneghan said.
The gaming enforcement division can ask the casino commission to re-open a casino's license. Aside from the Tropicana case, which involved a conservator to keep it operating while a new buyer was sought, the last time a casino's license was not renewed because of concerns about its financial stability was in April 1989 when the commission rejected a license renewal for the Atlantic casino, formerly known as the Playboy casino, which closed a month later.
