Delay of Revel bankruptcy is hardly a good sign, experts say

The Revel casino in Atlantic City. (AP Photo/Mel Evans)
The Revel casino in Atlantic City. (AP Photo/Mel Evans)
Posted: August 09, 2014

With the process of selling the $2.4 billion Revel Casino Hotel after its second bankruptcy cloaked in secrecy, it is difficult to determine what the postponement of its bankruptcy auction until next week really means.

But lawyers and other bankruptcy experts - none involved in the Revel case - outlined, in general terms, the factors that may be at play.

Such a delay is not unheard of, they said in interviews on Thursday, but it does not mean Revel's investment bankers received so many bids that they could not get through them in time to start the auction on schedule Thursday. Those bankers have armies of analysts who work around the clock to be ready.

In fact, the delay is not a good sign for the sales process, because it likely means that Revel's investment bankers were unable to establish an adequate "platform bid" - or starting bid - that could serve as leverage to get higher offers during the auction.

On the plus side, bids were made. Otherwise, the auction would have been canceled, not delayed.

A filing late Wednesday in U.S. Bankruptcy Court in Camden said Revel representatives needed "additional time to fully analyze and evaluate the bids received and are not prepared to go forward with the scheduled auction."

In Revel's case, there was no so-called stalking-horse bid secured ahead of the auction to set a baseline for subsequent bids. In the absence of that, complications can arise, bankruptcy experts said.

The offers that came in by Monday's deadline for bidding may have been constructed in ways that make them difficult to compare. For example, one bid could be all cash and another could have offered more money overall but included the assumption of debt.

"If the bids are different, then they have to set up bidding rules on common terms," said Dean C. Waldt, a bankruptcy attorney in Ballard Spahr L.L.P.'s Phoenix, Ariz., office.

Using an Atlantic City image, Waldt said, "They have to establish where 'Go' is," the starting point on the Monopoly board.

That would be the level from which bids would begin, in $1 million increments. Those negotiations can be long and arduous.

At the table evaluating bids are not just Revel's representatives, but also lawyers and advisers for secured creditors, unsecured creditors, and the Wells Fargo Bank, which lent money for Revel to use during bankruptcy.

Revel, which employed 3,106 in June, is expected to sell for substantially less than the $454 million it owes in secured debt. Both secured creditors and unsecured creditors will get less than they are owed. Typically, unsecured creditors - who have standing in court when bankruptcy sale is taken to a judge for approval - are given something to win their support.

Another wrinkle involves certain creditors with notes that are secured by potential payments from the $261.4 million in tax reimbursements that Revel could receive, if the company ever makes enough money to pay taxes.

In a bid to preserve its rights to that money, one of those creditors, Mudrick Capital Management L.P., of New York, filed an objection last month to the sale of Revel free and clear of liens and other claims.

In its 2013 bankruptcy, Revel slashed its debt to $270 million from $1.5 billion, and investors traded $923 million in debt for 100 percent of Revel's now likely worthless equity.



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