|By Donald Wittkowski, The Press of
Atlantic City, Pleasantville, N.J.McClatchy-Tribune Regional News
March 01, 2011--ATLANTIC CITY -- Wall Street financial giant Morgan Stanley found out the hard way that investing in the Atlantic City casino market can be just as risky as investing in the stock market.
The company has finally unloaded its ownership stake in the Revel casino project after suffering a $1.2 billion loss in the half-finished megaresort. It was disclosed weeks ago that Morgan Stanley would be bought out for $30 million by the casino's development group.
"The company will not retain any stake or ongoing involvement," Morgan Stanley said in a U.S. Securities and Exchange Commission filing Monday.
The filing announced that the sale became official on Feb. 17.
Morgan Stanley sold to an investor group headed by Kevin DeSanctis, chief executive officer of Revel Entertainment Group, the project's developer. Morgan Stanley was Revel's chief financial backer ever since the project began in 2006, but announced last April that it would bail out due to mounting losses. Altogether, the company lost about 98 percent of its $1.2 billion investment.
The DeSanctis-led investors acquired Morgan Stanley's share as part of a new $1.15 billion financing deal for the project. Revel announced Feb. 17 that it had secured the funding package and would push for a grand opening in mid-2012.
The new financing allows Revel to resume construction on the building's interior, which was halted in January 2009 after the project began encountering money shortages. Construction is nearly finished on the exterior of the casino hotel complex, and workers have returned to the job recently.
Revel is rising on a 20-acre oceanfront site on the northern end of the Boardwalk, next to Showboat Casino-Hotel. The casino will include an 1,100-room hotel tower, 800 fewer rooms than originally planned. Revel scaled back the hotel to hold down costs in the $2.4 billion project.
Last week, Standard & Poor's Ratings Services assigned a B-minus corporate credit rating to Revel, warning that the company could be hard-pressed to pay off its casino debt. S&P also gave a "negative outlook."
"The negative rating outlook reflects our belief that the company will be challenged to generate the substantial level of cash flow necessary to accommodate its debt service obligations," S&P said in a statement.
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Copyright (c) 2011, The Press of Atlantic City, Pleasantville, N.J.
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