Revel Resorts announced that they have officially filed for bankruptcy protection. Revel Casino and Resort, located in Atlantic City, reached an agreement to wipe our 82% of their debt by converting it into equity. Revel is the newest Atlantic City property and was the first to open in nearly ten years.
Revel currently carries over $1.5 billion in debt on their resort that cost an estimated $2.4 billion to construct. The deal would convert about $1.25 billion of this debt into equity. Reuters reports that Revel already has the required number of votes from debt holders to proceed.
The property was controversial from the beginning. Revel concentrated more on nightclubs and shows and less on gambling. Revel became the first casino in Atlantic City to ban smoking indoors. A rare policy for any casino in a jurisdiction that allows indoor smoking.
Revel also opened with a policy that discouraged seasoned gamblers from trying out their casino. These included a watered down players’ club that did not reward high volume players with special perks and policies that prevented giving comps to most players. This was especially puzzling to industry observers that felt Revel was already at a disadvantage not having access to a database of casino players to market and the need to entice players from other casinos to try their games. This has caused Revel to place either 10th or 11th in terms of gaming revenue out of 12 Atlantic City properties virtually every month since its launch on April 2, 2012.
The entire Atlantic City market is struggling. The city’s gaming win of $3.05 billion was down 8% in 2012 from the year before and down 40% from its 2006 peak of $5.16 billion. Revel, the most expensive construction project in the history of Atlantic City, has accounted for only 3-4% of total Atlantic City gaming revenue since its launch.
The bankruptcy is not expected to affect patrons or employees. The company has enough cash to meet payroll and day to day operations. The question remains whether the $272 million of debt that Revel will carry can be serviced on the low gaming revenue that the resort has historically reported each month.