When the Atlantic Club filed for bankruptcy, everyone believed that they had a buyer waiting in the wings, waiting to save the casino, and the jobs of more than 1600 employees, by paying a bargain price. Such was not the case. As the court signed off on the terms already agreed to by the parties behind closed doors of the Atlantic Club’s attorneys and bidders, the bottom line became public. Lawyers for Colony Capital, owners of the casino, had not taken the highest bid for the property, but instead agreed to sell it to Caesars Entertainment for $ 15 million, with slot machines and tables going to Atlantic City’s Tropicana for another $ 8.4 million. The nail in the coffin followed, Caesars had no intention of not only never reopening the casino, but not even operating the hotel.
Boom, 1660 people out of work, just like that. It was already known that Atlantic Club had a debt of approximately $ 32 million for the unfunded employee pension plan which would be discharged as part of the bankruptcy, so not only do all those employees have no job, they also have no pension. Obligated to have enough funding available to operate during the process, the casino gained available financing for up to $ 15 million from a hedge fund of Northern Lights in Ohio, but that money runs out on January 13, and the doors will close.
According to court records, a division of the California based Meruelo Group offered a price exceeding the combined bid of Caesars and Tropicana, but they were rebuffed when the casino owners decided less was more. The Meruelo Group already owns and operates the Grand Sierra Resort and Casino in Reno, Nevada.
Attorneys for the Meruelo Group argued in court following the deal they were cut from, asking the judge to discard the agreement between Colony/Caesars/Tropicana and restart the bidding process but Judge Gloria Burns told them that only proof of fraud or collusion could potentially void the deal. Even if onlookers believe that such behind scenes collusion took place, it’s difficult to prove.
Contrary to reports following the court session, Meruelo say they would indeed have kept the casino operating. Earlier this year, Meruelo made a bid for the troubled Trump Plaza Hotel and Casino in Atlantic City, only to have been turned down a month after they believed their offer was accepted. Rumors have been that a major stockholder wanted more money for the property. Trump Plaza, together with Trump Taj Mahal, have a combined debt of about $ 280 million. Meruelo’s offer for the Plaza property alone was said to be $ 20 million plus the assumption of several liabilities. They hold the option on the property thru today.
The Atlantic Club had accepted an offer this same time last year to get them out of their financial difficulties. They contracted to sell the casino to online poker giant PokerStars. Shortly after Governor Christie signed the state’s internet gaming law into effect, the Atlantic Club terminated the contract and began looking for a much better offer than what they had. At the time, PokerStars had already paid $ 11 of the $ 15 million sales price. Part of that contract was that PokerStars would keep the casino running, build a state of the art poker room, and assume the liability for that unfunded pension plan.
The more than 1600 employees will be without jobs come January 13. The majority will likely have to leave the area to find work, and many are already talking about having to sell the homes they grew up in. No other casinos in town are hiring. Some of those employees have been with the casino since the 1980′s.
The only other casino to close in Atlantic City since gaming started was the Sands. A small casino, the Sands was bought by Pinnacle Entertainment along with another adjacent lot of property bringing the possible new location for the casino right to the boardwalk. The building was razed but when the economy took a dive a few years back, and Pinnacle was unable to get certain concessions they wanted, they discarded the idea to rebuild. That property is now just a grassy knoll (that alone took a few years, it was a fenced in dirt pile for years before that).
It’s not a surprise that Caesars do not plan to operate the casino. Shouldering over $ 23 billion in debt already, Caesars just sold off another property in Atlantic City, the former Claridge Hotel and Casino. The group bought the Claridge several years ago, and to keep within regulations of not owning too many casinos, they built a skywalk connecting the Claridge with another of their properties, Bally’s Park Place, making it technically “one unit”. The casino section of the Claridge was closed last year, and the hotel was sold in October to a Florida hotel group that reportedly have no intention of ever reopening the casino other than as a hotel.
So we have a major player in Atlantic City Casinos buying up casinos to shut them down so no one else has them. That’s one way to corner the market. While some publicly say it’s good for the casino ecosystem in the state to have less properties in a stagnant market, the appearance of who makes the rules in town is disconcerting. A section of the Casino Control Act Commison and Regulations in New Jersey used against Caesars once before could apply here. When investigating Caesars connection to the Terrance Watanabe matter in Nevada, Caesars paid a fine of $ 225,000. Disciplinary action can be brought by the Division of Gaming Enforcement in New Jerey against a casino if their activity could be construed to reflect discredit upon New Jersey or the gaming industry in general. If being permitted to decide who gets to buy and run a casino or not is made by Caesars and the selling parties, instead of the DGE, some would argue that that discredit exists.