Tropicana Lands On Red

Tropicana Entertainment plans to make the biggest corporate bankruptcy filing of the year – a surprising move that comes two years after a new owner ventured into the gaming business and announced a major expansion of the Las Vegas Tropicana.

Gaming is down in Sin City as the economy stumbles, according to the Wall Street Journal, and several projects have been delayed or suspended. However, the Tropicana – a Vegas landmark since 1957 – may be having financial difficulties triggered by issues other than an economic downturn.

Tropicana Entertainment owns the Las Vegas casino as well as 12 other casinos throughout the U.S. and the Caribbean. The company has $2.67 billion in rated and bond debt, according to Moody’s Investors Service.

The company recently missed an interest payment on a $1.32 billion loan from lender Credit Suisse Group, two sources told the WSJ. If Tropicana misses that payment, it would terminate a forebearance agreement with bondholders, putting more pressure on the company.

Businessman William Yung III, owner and operator of hotel-property owner Columbia Sussex Corp., ventured into the gambling business in the early ’90s with the purchase of a casino in Lake Tahoe. He won a bidding war in 2006 for Aztar Corp., which owned the Tropicana brand. However, the $1.94 billion deal "dropped jaws in the industry," setting prices for land on the Las Vegas Strip to as much as $30 million an acre, according to the WSJ.

Renovations are expected for the hotel, which sits on an intersection that apparently has more hotel rooms than any other place in the world. Rather than demolishing the two iconic towers, renovations are expected, including the addition of three towers.

But Yung is struggling to keep the company together, the WSJ said, and has made cutbacks to the properties in Atlantic City and Las Vegas. That led to New Jersey gambling regulators taking the unusual step of removing the company’s casino license late last year because, they said, the Tropicana in Atlantic City was operating so poorly under the budget cuts that it was in violation of state regulations.

The Atlantic City casino, which is not part of the expected bankruptcy filing, is in state control and up for sale, according to the paper.

Tropicana Entertainment President Scott Butera told the WSJ he viewed the restructuring as a positive step, adding that the company is "cash-flow positive and in very constructive dialogue with our lending groups."