|By Donald Wittkowski, The Press of
Atlantic City, Pleasantville, N.J.McClatchy-Tribune Regional News
Nov. 04, 2011--ATLANTIC CITY -- The owners of ACH, formerly known as the Atlantic City Hilton Casino Resort, proposed a new plan Thursday to save the financially troubled gaming hall from foreclosure and preserve its nearly 2,000 jobs.
Parent company Colony Capital LLC and a group of lenders have reached a deal to keep the Boardwalk casino open and give it a $24.3 million cash infusion. In return, Colony has agreed to allow lenders to foreclose on its Bally's Tunica and Resorts Tunica casinos in Mississippi, New Jersey gaming regulators said.
ACH's proposed sale is now off. Instead, Colony will continue to own the property through its Resorts International Holdings LLC affiliate. The new deal averts ACH's foreclosure and wipes out the casino's debt, giving Atlantic City's smallest gaming property some breathing room as it struggles to compete with its bigger rivals.
"It's a vote of confidence for our customers that we will still be around in the market," said Michael Frawley, ACH's chief operating officer. "I think we have a great plan moving forward. We're happy to tell our employees that they remain secure. We're looking forward to being part of Atlantic City."
Frawley said the company will soon announce additional plans, including the casino's possible rebranding and another name change. Over the summer, the casino began calling itself ACH -- an acronym for Atlantic City Hilton -- on its website and in its promotional literature after it lost the right to use the iconic Hilton name. Frawley said ACH is the formal name for now.
Hilton Hotels & Resorts ended its franchise agreement with the casino for the Hilton brand but did not divulge the reason for doing so. Hilton Hotels also is terminating the naming-rights deal for the Colony-owned Las Vegas Hilton casino hotel.
No buyer emerged since the Atlantic City casino was put up for sale by its lenders in January. The casino defaulted on its mortgage in July 2009 and was threatened with foreclosure. Lenders later put the foreclosure proceedings on hold, electing to try to sell the property instead.
"There was no shortage of buyers," Frawley said of potential new owners. "It was a matter of trying to find the right fit for the company."
ACH's rescue plan was outlined in a petition filed Thursday with the New Jersey Division of Gaming Enforcement, the state agency that regulates Atlantic City's casino industry. The division plans to file its formal response next week.
"This agreement culminates a long period of uncertainty for ACH employees and the city of Atlantic City," David Rebuck, the division's acting director, said in a statement. "We are pleased with the efforts of all the parties in reaching this agreement, aimed at allowing the casino to sustain its high level of operations while maintaining the hundreds of jobs of persons employed by ACH."
Employment statistics compiled by the state show that ACH had 1,925 workers as of October, the most recent figures available.
The New Jersey Casino Control Commission, which oversees casino licenses, will discuss the new ACH deal during its Nov. 16 meeting. At that time, the Division of Gaming Enforcement will present its case regarding ACH's financial stability, a key requirement for casinos to keep their license.
In the petition, ACH's owners indicated the new agreement will allow the casino to meet its financial obligations. The owners want the Casino Control Commission to rule that ACH has the financial stability, resources and ability to continue operating.
"(The casino) will embark upon a business plan which gives it a better opportunity to compete in the reality of an evolving Atlantic City gaming market," the petition said.
A spokeswoman for Colony Capital declined to comment Thursday. Nicholas L. Ribis, ACH's chief executive officer and minority owner, could not be reached for comment. Frawley, who will continue as chief operating officer, said Ribis will stay on as CEO.
New Jersey gaming regulators have been keeping an eye on ACH as its financial condition continued to deteriorate. Analysts have questioned just how long the casino can hold on. ACH has suffered a $10.8 million operating loss through the first half of this year and has seen its gaming revenue plunge nearly 12 percent so far in 2011.
However, Colony's deal with the lenders will pump $24.3 million in badly needed cash into ACH. Colony, a California-based private real estate investment firm, plans to contribute $15 million. In addition, lenders will free up an extra $9.3 million in cash when they release insurance proceeds from an August 2009 flooding claim at the casino, ACH's petition states.
The Hilton was valued at $513 million when it was purchased by Colony in 2005 as part of a $1.24 billion deal for four casinos in New Jersey, Mississippi and Indiana. Colony bought the Hilton close to the peak of the Atlantic City market, a year before casino gambling began in Pennsylvania. The sluggish economy and stiff competition from Pennsylvania have driven down Atlantic City's gaming revenue 30 percent, from $5.2 billion in 2006 to $3.6 billion in 2010.
Recent casino sale prices reflect the slumping Atlantic City market. Colony Capital got burned with its former ownership of Resorts Casino Hotel. When Resorts was sold for $31.5 million last December to gaming executive Dennis Gomes and real estate magnate Morris Bailey, it was only a fraction of the $140 million that Colony paid to buy the casino in 2001. Trump Marina Hotel Casino, now known as Golden Nugget Atlantic City, sold for $38 million in May, well under the proposed $316 million price tag during a failed attempt at a sale in 2008.
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