The Shadow
ATLANTIC CITY, New Jersey (AP) – Resorts Atlantic City, the first U.S. casino outside Nevada, says it may not survive; another Atlantic City casino hasn’t made a loan payment since last summer; and three others are in bankruptcy court.
Atlantic City’s 11 casinos have been struggling for more than three years. Financial documents filed with the state this week show just how bad things have gotten.
The news was worst for the two casinos believed to be the most endangered: Resorts Atlantic City, which was taken over by its lenders in December, and the Atlantic City Hilton Casino Resort, which defaulted on its mortgage in July and could be headed for the same fate.
Resorts, formerly owned by hedge fund Colony Capital, based in Los Angeles, told New Jersey officials in a quarterly tax return that its financial challenges “raise substantial doubt about the company’s ability to continue as a going concern.” It said three major storms this winter made even its projections from November look too optimistic, and “the company will be subject to severe cash shortages.”
Even though the “going concern” language is boilerplate accounting terminology, Cory Morowitz, a casino analyst based near Atlantic City, said it shows Resorts is in serious trouble. For 2009, it posted a loss of $18 million on $161.2 million in revenue.
“They’re not making an operating profit,” he said. “They don’t take in enough money to pay their expenses and generate a cash flow.”
The Hilton, which is still owned by Colony Capital, posted a $16.9 million gross operating loss for 2009 on $165.2 million in revenue. It told the state it stopped paying on its $359.5 million debt because of “the current economic conditions.”
The city’s three casinos formerly owned by Trump Entertainment Resorts remain in bankruptcy court, but a judge is to decide within two weeks who will take them over – the company’s bondholders and real estate mogul Donald Trump, who built the casinos but lost them in a separate bankruptcy years ago, or billionaire investor Carl Icahn and Dallas-based Beal Bank.
If Icahn gets them, Trump Marina Hotel Casino may close, based on his testimony in the bankruptcy case.
Trump Plaza Hotel and Casino posted the biggest drop in gross operating profit last year, falling a whopping 74.6 percent to $9.2 million on $196.7 million in revenue.
Spokesmen for Resorts and Colony Capital did not immediately return calls seeking comment Tuesday. Trump Entertainment’s bondholders have declined to discuss their plans, should they prevail over Icahn in federal bankruptcy court.
“The way the economy is, there’s not enough gaming revenue to support 11 casinos,” Morowitz said.
