|By Suzette Parmley, The Philadelphia
InquirerMcClatchy-Tribune Regional News
September 13, 2009 - ATLANTIC CITY -- Diane George vividly remembers opening day at Resorts Casino Hotel, the city's first, more than three decades ago.
George, then 25, was among the scores who braved a long line to get through the glass doors on May 26, 1978, and helped set the stage for what would become Atlantic City's destiny.
"It was exciting. There were so many people," said George, now 56, a retired wire technician from Wynnefield Heights. "I can still see the lines snaking around the Boardwalk."
But the celebratory atmosphere of that day has long since faded. Today, Resorts is fighting for its life.
State gambling regulators could rule as early as this week whether Resorts will be taken over by its lenders or continue to struggle on its own as its revenue slides. Closure is a possibility.
Resorts has not made a payment on its $360 million mortgage since October. On Aug. 14, it filed a petition with the New Jersey Casino Control Commission to transfer ownership to its lenders.
If state regulators approve Resorts' request, it would be the first time in the city's 31-year casino history that a lender has taken control of a gaming hall.
In Las Vegas, that has already happened -- twice. Last month, the tiny Greek Isles Casino was seized by its lender, which foreclosed on it for $47 million.
Early last year, the Cosmopolitan Casino on the Strip was taken over by Deutsche Bank AG after its developer defaulted on more than $900 million in loans. The bank is currently moving forward with completing the $3-billion-plus project.
"The credit markets have dried up. This is not something unique to casinos, hospitality, and tourism. It's happening to everybody," said David G. Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas and author of Roll the Bones: The History of Gambling.
Resorts has plowed on as one of Atlantic City's smallest casinos. As the resort built its early East Coast monopoly to a dozen casinos, newer enterprises often plucked experienced workers from Resorts.
Even as bigger, flashier competitors opened -- such as the $1 billion Trump Taj Mahal Casino Resort (April 1990) and the $1.1 billion Borgata Hotel Casino & Spa (July 2003) -- Resorts kept its niche.
Because it stayed small, the casino boasted that it provided top customer service, and it maintained a corps of loyal customers -- such as George.
"Anything you need, they're right on top of it," she said Wednesday while playing a slot machine.
But the recession and regional slots competition have put a big squeeze on small casinos. Figures released Thursday showed Resorts' revenue down 7.8 percent last month, and 20.1 percent year-to-date.
At Atlantic City's 11 casinos, revenue was down a combined 16.3 percent, a record August low, and 15.1 percent year-to-date.
"Resorts has experienced the same downdraft in their cash flows as all other Atlantic City operators," said gambling analyst Andrew Zarnett of Deutsche Bank. "However, by being one of the smaller operators in the market, instead of reduced profit, they've experienced absolute losses . . .
"For the lenders and the state, the worst-case scenario would be closure of the property," Zarnett said. "The rationale is that [the takeover] buys the owner and the state time to see if the property can turn around."
On Aug. 28, the state gambling commission took three hours of testimony from Resorts' current owner and its lead lender on why the takeover request made sense in today's Darwinian gambling market, where being small is a distinct disadvantage.
If the transfer is approved, the existing licensee, Resorts International Hotel Inc., will continue to manage and control the operations of the property. Title will be conveyed to RAC Atlantic City Holdings L.L.C., a new entity wholly owned by Wells Fargo Bank N.A. as trustee of the securitization trust.
The new owner would immediately infuse $8 million into the casino, so it would have enough cash to meet a $15 million required reserve through 2010. The casino has been operating below that standard for months.
"We are trying to get the property to where we can sell it at a better time," Stephen Yankeuer, managing director of Credit Suisse and vice president of Column Financial Inc., told the commission. "Clearly, everyone understands the delicate situation we are in. It's in no one's interest to have things come to an end. We hope to see some positive recovery out of this."
The only other recourse, Yankeuer said, is to begin foreclosure proceedings -- which neither side wants.
Nick Ribis, vice chairman and chief executive officer of Resorts International, said he would remain in charge of daily operations under a six-month contract that the new owner could renew.
Recessionary times make a change of ownership necessary, Ribis told the hearing, attended by about two dozen longtime Resorts employees.
"Resorts in the economic climate . . . has performed well," he said, "but not well enough to pay a $360 million mortgage."
Several properties in Atlantic City are going through the same thing, Ribis said. (Over the summer, the Tropicana was sold at a bankruptcy auction, and the three Trump casinos are in the middle of a bankruptcy restructuring.)
"Unless the economy changes quickly," he said, "we won't be the last company to sit in this [hearing-room] chair."
More important, Ribis said, under an ownership transfer, 2,324 employees, 1,798 of them full-time, would keep their jobs.
Steve Callender, Resorts' senior vice president of operations, was 24 when he was selected from 10,000 applicants for the casino's first class of 450 dealers. Opening day, both men and women dealers wore black tuxedos.
"I had butterflies," said Callender, who attended dealer school for three months to prepare. "Everyone was nervous.
"I don't know if we realized how big it would be, but we knew we were pioneers, and that it would help to turn the city around, and it gave a lot of opportunity for the people who lived here."
All these years later, Callender, 55, wants nothing more than for his casino to make it.
"The best-case scenario is to keep moving on and keep delivering service for our customers. We are doing the right thing here," he said.
"Choice is what makes casinos competitive. We are a great choice for a lot of people."
Contact staff writer Suzette Parmley at 215-854-2594 or firstname.lastname@example.org.
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