Resorts agrees to takeover by lenders (Atlantic City)

WILynn · Resorts agrees to takeover by lenders (Atlantic City)

By DONALD WITTKOWSKI Staff Writer, 609-272-7258 | Posted: Friday, August 14, 2009

ATLANTIC CITY - Resorts Atlantic City, the grandfather of East Coast casinos, has agreed to be taken over by its lenders after falling behind on its mortgage payments and threatened with foreclosure.

Resorts had not made a payment on its $360 million mortgage since October, prompting main lender Column Financial Inc. to seek and receive New Jersey Casino Control Commission approval in March to begin foreclosure procedures.

In papers released Friday by the commission, Resorts said it would hand itself over to a group of lenders that includes Column parent company Credit Suisse. However, Resorts' Chief Executive Officer Nicholas L. Ribis would stay on to run the property under a management agreement. Resorts' current owner, Colony Capital LLC and its corporate affiliates, would transfer their stake to Ribis and leave.

The proposed takeover by lenders is unprecedented in Atlantic City's 31-year history of casino gambling. The Casino Control Commission will schedule a special hearing later this month to consider giving the plan regulatory approval.

"This would be the first time that a casino in Atlantic City would change hands in this fashion," commission spokesman Daniel Heneghan said.

Resorts spokesman Alan C. Marcus declined to comment. Marcus said Ribis would not comment on the proposal before it is considered by the commission. Colony Capital and representatives of the lenders also declined to comment.

Resorts began Atlantic City's casino era when it opened on May 26, 1978, to packed crowds. It is the oldest casino on the East Coast. Over the years, the Boardwalk property has reeled under bankruptcy, a succession of owners and its inability to keep pace with a new generation of larger, glitzier casinos.

Colony Capital, a private real estate investment firm based in Los Angeles, acquired the casino in 2001 for $140 million. It was a fire sale price. The previous owner, Sun International Hotels Ltd., paid $301 million five years earlier to buy it from entertainer Merv Griffin. Griffin's ownership from 1988 to 1996 was marred by two bankruptcies.

In recent years, Resorts has developed a reputation as a haven for older gamblers, not the young, free-spending crowds coveted by a city that bills itself as "Always Turned On" in its marketing slogan.

"Most of the senior citizens from our area in Long Island come here," said Marge Savoca, a 78-year-old gambler from Mineola, N.Y., who was part of an overnight tour-bus group at Resorts.

Savoca and fellow New Yorkers Anna Catalano, 70, and Marion Fitzpatrick, 57, stood outside the Boardwalk entrance to Resorts, where Hollywood Walk of Fame-style plaques adorned with the handprints of big-name entertainers decorate the casino's facade. Aging stars such as Tom Jones, Engelbert Humperdinck and Don Rickles once defined Resorts' entertainment scene, but hardly resonate with younger audiences now.

Mel Druin, another Resorts customer, said he hopes the new owners will upgrade the restaurants and add more luxury amenities to be competitive with Borgata Hotel Casino & Spa, Atlantic City's newest gaming property.

"Borgata is much more upscale and leaves Resorts and everybody else behind," said Druin, 68, of Freehold, Monmouth County.

Resorts' new owners will be a consortium of lenders, including Wells Fargo on behalf of Credit Suisse First Boston Mortgage Securities Inc. A key issue is whether the Casino Control Commission will require the lenders to obtain a full-fledged casino license as part of the takeover or will approve their request for a less onerous nongaming service industry license.

In their papers filed with the commission, the lenders say they need only a nongaming license because they will not have direct control over Resorts' operations. Ribis, who already holds a full casino license, would have control in his role as Resorts' operator under the proposed management structure.

Ribis, a lawyer who once served as CEO of Donald Trump's casino empire, vowed never to relinquish his interest in Resorts during a March interview with The Press of Atlantic City.

"Just because things get difficult doesn't mean you walk away," Ribis said then.

Ribis is also part of Colony Capital's ownership of the Atlantic City Hilton Casino Resort. Hilton, however, is controlled through a different Colony affiliate and separate financial agreements. It has been unaffected by Resorts' foreclosure fight with the lenders.

Resorts' financial problems are symptomatic of the slump that has engulfed Atlantic City's entire casino industry. The recession and extra competition from slot parlors in Pennsylvania have combined to drive down gaming revenue by nearly 15 percent industrywide for the first seven months this year. Resorts is even worse, falling 22 percent for the year.