Revel CEO DeSanctis steps down

Kevin DeSanctis, CEO of Revel Entertainment Group, said he could get the needed funds.
Kevin DeSanctis, CEO of Revel Entertainment Group, said he could get the needed funds.
Posted: March 14, 2013

Kevin DeSanctis, Revel's chief executive officer since the financially troubled casino debuted at the northern end of the Boardwalk in April and the man largely credited with shepherding its five-year construction through the recession and frozen credit markets, is stepping down.

In a statement just after noon Wednesday, Revel's owner, Revel AC Inc., announced that its board of directors had appointed as interim CEO Jeffrey Hartmann, a 20-year gaming- and hospitality-industry veteran. Hartmann has worked as a consultant for Revel since the early part of this year, and his new role in charge of day-to-day operations there becomes effective as soon as he receives regulatory approval.

Michael Garrity, Revel's chief investment officer, is also resigning from his position. The company said both DeSanctis and Garrity would retain their posts as CEO and CIO of Revel Group, the holding company that developed the casino and is owner and licenser of the Revel brand.

The company said Revel Group would have no affiliation with Revel AC Inc. on the conclusion of Revel's bankruptcy, which is expected to take about two months. The two will be separate entities moving forward.

DeSanctis's departure had been a focus of speculation since Revel announced Feb. 19 that it was filing a prepackaged Chapter 11 bankruptcy this month. The casino's total monthly gaming revenues continue to fall far below Wall Street expectations - just $9 million in February and $8 million in January.

With so little gambling revenue coming in, Revel - built at a cost of $2.4 billion - missed an interest payment on its bonds in January, and its precarious financial situtation has had the eye of New Jersey gaming regulators for some time.

As CEO, DeSanctis was behind, and repeatedly defended, Revel's philosophy of focusing on nongaming revenue - food and beverage, conventions and rooms - as the new business model for Atlantic City.

Revel's net revenue for third quarter 2012, according to the state Division of Gaming Enforcement, was $61.9 million, of which $24.1 million was derived from nongaming revenue sources, including rooms and entertainment.

Overall, Atlantic City has seen gaming revenues plummet drastically in the last six years because of regional competition from Pennsylvania and other states. The resort's gaming market is now just under $3 billion a year, and it had been banking on Revel to turn its fortunes around. The Las Vegas-style casino had the support of Gov. Christie, who steered $261 million in state tax credits to getting it built.

Bob McDevitt, president of Unite Here Local 54, which represents 15,000 casino and hotel workers in Atlantic City and which has been critical of management at the non-union Revel since it opened, said in a statement, "We have had a keen interest in this project from the beginning. We hope that the changes under way at the property will be constructive for everyone who works there and for Atlantic City as a whole. We look forward to a better relationship with Revel in the future."

DeSanctis, a former high-ranking executive at Wyomissing-based Penn National Gaming Inc., praised Hartmann's credentials.

"I have no doubt he is the right person to lead Revel AC through the restructuring process and oversee day-to-day operations," DeSanctis said in a statement. "Revel's resort is the marquee asset in the Northeast, and with the right-sized balance sheet and under Jeff's stewardship, I am confident that Revel is poised for success."

Hartmann, who was president and CEO of Mohehan Sun Casino Resort in Connecticut from January 2011 until October, acknowledged that getting through the financial restructuring will be key to Revel's turnaround.

The prepackaged bankruptcy is intended to wipe out about $1 billion of the casino's debt in a equity-for-debt swap with its creditors. Revel currently has about $1.3 billion in debt, according to SEC filings.

"As we undergo our financial restructuring, which is a transformative step for Revel," Hartmann said, "I am deeply committed to ensuring that we operate our business as usual and emerge from this process positioned for long-term success."

Revel is expected to file in U.S. Bankruptcy Court within two weeks.

Last month, the casino ranked 10th among the dozen Atlantic City gambling halls in total casino revenue, just ahead of much-smaller Resorts and Trump Plaza.

In a note to investors Wednesday, gaming analyst Andrew Zarnett, of Deutsche Bank A.G., wrote, "With a new reorganized capital structure in place, in order to be successful, we believe Revel will likely have to target the Borgata customer. In return, Borgata may increase promotional spend or choose to absorb near-term cannibalization."


Contact Suzette Parmley at 215-854-2855 or sparmley@phillynews.com.

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