Tropicana Entertainment LLC will be allowed to place Casino Aztar on the auction block again.
A Delaware judge gave Tropicana Entertainment permission today to hold a new sale of Casino Aztar. In March, Tropicana had agreed to sell the casino to Eldorado Resorts LLC for as much as USD 245 million. The transaction was to take place once Eldorado, based in a Reno, Nev., obtained a license to run a casino in Indiana.
But that deal was negated about a month later, when Tropicana declared bankruptcy. As as result, Tropicana sought permission to the put the casino up for sale again, which the bankruptcy judge granted today. The new sale will likely take place in the first half of November.
In the earlier auction, nine companies had submitted offers in the first round of bidding. Scott Butera, the president of Tropicana, said his intention is to hold another successful sale. Even so, Tropicana is keeping open the possibility of trying to remain the owner of Casino Aztar.
“We think this is very standard,” Butera said. “If we are not successful at getting a fair price there is the possibility that the asset will be retained.”
That Tropicana Entertainment could keep Casino Aztar is especially troubling to Eldorado Resorts because, in that case, it would be out a large amount of money. Eldorado expects to have paid nearly USD 1.85 million by the end of the year in order to obtain financing for the planned acquisition.
Under the original purchase agreement, Eldorado would get that and more back if Tropicana sold Casino Aztar to another company. If any company besides Eldorado buys the casino, Eldorado gets a breakup fee of USD 6.6 million, as well as reimburse expenses of up to USD 500,000. But if Tropicana keeps the casino, those fees are avoided.
To prevent that second possibility from happening, Eldorado filed an objection to the new auction. In it Eldorado argued that few companies would want to go to the expense of bidding on Casino Aztar if they couldn’t be certain that Tropicana would indeed sell the property. That objection was effectively denied by the decision to allow the new sale.
If Tropicana tries to keep Casino Aztar, it likely won’t be able to do so without some difficulty. One large question is whether Indiana regulators would allow Tropicana Entertainment to keep its license to run a casino in Indiana. That became an issue in December, when New Jersey regulators revoked the company’s license to run its Tropicana Casino in Atlantic City. Under state law, Indiana regulators may not approve a license for a company that has seen one revoked elsewhere.
Even before then, Mayor Jonathan Weinzapfel’s complaints about a large number of layoffs at Casino Aztar had prompted regulators to begin investigating Tropicana Entertainment and its affiliate, Columbia Sussex. That scrutiny was suspended when the first sale of Casino Aztar was announced. Regulators have not said whether they would resume the investigation if Tropicana tried to keep the casino.
For its part, Tropicana Entertainment has taken pains in recent months to portray itself as a new company. The biggest step in that direction has been the resignation of the owner, William C. Yung III, from his seat on the company’s board of directors and his position as chief executive officer. Tropicana has also moved its headquarters to Las Vegas, distancing it from Columbia Sussex, based in Crestview Hills, Ky.
Yung, who became rich in the hotel business, has drawn many complaints about his running of the casino business. Following the loss of the license in New Jersey, investors in Tropicana said that “Yung’s grossly misguided business decisions and autocratic and contentious managerial style led the debtors (and their creditors) to disaster after disaster.”
In early 2007, Columbia Sussex paid about USD 2.1 billion for Aztar Corp., after having won a bidding war against several other companies.