Vegas casino owner wins Revel auction

Brookfield Asset Management's winning bid of $110 million for Atlantic City's Revel Casino Hotel, and the company's intention to operate it as a casino, have generated excitement.

But the financial condition of Brookfield's Hard Rock Hotel & Casino Las Vegas is a sobering reminder that troubled casinos are not always easy to turn around.

The Las Vegas casino is in deep financial trouble, warning in a Securities and Exchange Commission filing on August 12 that it didn't have money to make an interest payment on August 25.

The casino has $988 million in debt, including unpaid interest.

"Hard Rock casino has been in ongoing talks to refinance its debt," Brookfield spokesman Andrew Willis said Wednesday.

A Brookfield entity, BREF HR L.L.C., took control of the Hard Rock casino in March 2011 when the previous owner also couldn't pay its debt. At the time, the debt stood at $1.3 billion.

The casino lost $44.4 million in the six months ended June 30 and has a cumulative deficit of $245 million.

A hearing to seek approval of the sale of Revel to a Brookfield unit, Brookfield US Holdings L.L.C., has been scheduled for Tuesday at 10 a.m. in U.S. Bankruptcy Court in Camden.

At Revel, Brookfield will presumably have the advantage of low debt, unless it spends heavily to remodel the property.

Brookfield, which also owns Atlantis Paradise Island in the Bahamas, was competing against Glenn Straub, a Florida investor whose high bid in the auction, which lasted into early Wednesday, was $95.4 million.

Straub was chosen as the backup bidder, in case the deal with Brookfield doesn't close.

Straub's attorney, Stuart J. Moskovitz, has said that Straub would mount a legal challenge if he lost the auction because of irregularities in the way it was conducted. Moskowitz could not be reached for comment Wednesday.

For example, John K. Cunningham, Revel's lead bankruptcy attorney, did not reveal until Tuesday in a filing designed to disclose potential conflicts of interest that Brookfield, a client of his firm in unrelated matters, was involved in the auction.

That raised the question of whether Brookfield met the bid deadline of 4 p.m. Sept. 23.

It's possible that Cunningham and his investment banker colleagues received a timely bid from Brookfield that was deficient or not acceptable to the sellers. The bid procedures approved by the bankruptcy court allowed them to work with Brookfield to improve the bid to the point where Brookfield could participate in the auction.

Cunningham said last week that he was following the approved bid procedures, which also allow him to "modify the bid procedures in any way that will best promote the goals of the sale."

All of that means that Straub, a disgruntled bidder, will have a hard time successfully protesting the sale to Brookfield.

Revel is expected on Wednesday to file a bankruptcy court notice of the auction's result. The filing should include a copy of the Brookfield asset purchase agreement, which would likely show whether Brookfield intends to file for a gaming license.

Source: Philly.com