Just days short of a year since it opened to great fanfare, Atlantic City’s no smoking casino experiment Revel is looking to declare bankruptcy, based on federal securities regulators’ disclosure statements the casino filed earlier this week. Through the magic of high finance sleight-of-hand, some $1.5 billion in staggering debt will now be converted into $1 billion in equity for the casino’s eager creditors, and a new CEO, Jeffrey Hartman (formerly of the Mohegan Sun in Connecticut) will take over the reins of this faltering mare.
Resignations Are a Good Deal
Hartman takes over for recently departed Walk of Shamers ex-CEO Kevin deSanctis and Chief Investment Officer Michael Garrity; thankfully, this isn’t Japan, or there would be intestinal entrails from the penthouse to the parking lot by now. Nope, this is America, where a smartly negotiated contract when you sign up gets you a well-paid ride when you’re axed; so DeSanctis and Garrity not only get to stay on with the Revel brand, they can also look forward to about $7 million in consulting fees for the rest of the year. Is that each or together? We’re not sure, but our hat goes off to their attorneys: well-played, counselors, well-played!
Although Atlantic City overall has been in a financial nosedive recently (attributed to everything from Hurricane Sandy to an unclear marketing platform for conventions), some are still pointing fingers at DeSanctis and Garrity for creating the first-ever 100 percent nonsmoking casino in AC. This isn’t really as wild and crazy an idea as it may appear; poker rooms nationwide have been totally nonsmoking for more than a decade and until online poker’s Black Friday hit and forced many of them to shut down, it didn’t seem to even put a small dent on business there. Nonetheless, investors had implored non-Cheech and non-Chong to switch back to a more traditional mostly smoking format, but alas, to no avail.
The issue may not really be smoking vs. nonsmoking anyway; besides the poker room analogy, even smoke-crazy Macau established a partial smoking ban as of January 1st, yet appears to be on track for a record month of revenues for March of this year. More likely, it’s a reflection of Atlantic City’s overall freefall, as the city has spiraled 41.5% in the wrong direction since 2006, versus Las Vegas’ 7.2% drop, and Sin City has had way more recessionary disasters to deal with than AC.
It Doesn’t Add Up
With a limited, enclosed smoking area now established at the behest of anxious creditors, Revel says it could actually turn a profit next year; but that’s not taking its debt servicing costs into account. Currently ranked 10th out of 12 on the revenue scale of AC casinos, maybe what Revel really needs is someone who can do math.