New Jersey's refusal to renew a gaming license for Northern Kentucky entrepreneur Bill Yung could force his gaming company, Tropicana Entertainment LLC, into bankruptcy.
That's the word from Yung's Crestview Hills headquarters, where company executives are analyzing the impact of the license denial by New Jersey regulators on Wednesday.
By a 4-1 vote, the New Jersey Casino Control Commission placed the property under the control of a trustee, former New Jersey Supreme Court Justice Gary Stein. Under New Jersey gaming rules, Stein will run the casino until a new owner can be found.
In a 63-page order, commissioners cited Yung's failure to establish an independent audit committee to oversee casino operations and "a demonstrated lack of financial integrity" as key factors in the license denial. It also imposed a $750,000 fine. Tropicana indicates it will appeal the decision through the New Jersey appellate court system.
In the meantime, it is pursuing the "prompt and orderly sale" of the Tropicana Atlantic City and is "analyzing the potential impact" of the license denial on its gaming licenses in other states. The company's Thursday statement also describes a potential default that could allow lenders to accelerate principal repayment schedules unless Tropicana Entertainment can "stay or reverse" the New Jersey decision by Dec. 19.
"There can be no assurance that the lenders will not accelerate, which could compel the company to seek alternatives, including, without limitation, bankruptcy protection," the statement said.
Still unclear is what impact a Tropicana bankruptcy could have on Columbia Sussex Corp., a hotel company that is affiliated with Yung's gaming enterprise. Yung acquired the Tropicana Atlantic City when he won a bidding war for the publicly traded Aztar Corp. last year. The Atlantic City property is one of 14 casino properties owned by Yung, but it generates more than a third of the revenue and operating profits Yung needs to pay off debt from the acquisition.
Yung has been sharply criticized for cutting roughly 900 jobs at the Atlantic City casino. Union leaders, customers and regulators told the commission during an eight-day hearing that the cuts hampered customer service and cleanliness, chasing away business. But regulators made it clear that the cleanliness issues were not the primary reasons for its license rejection.
"The Atlantic City model works well because it involves a mutual level of cooperation and trust between the regulators and the regulated that is unparalleled worldwide," the Dec. 12 report states. "Simply put, Yung exhibited a lack of cooperation on a grand scale that did nothing to earn regulatory trust in his ability to operate in this marketplace. Moreover, his decision-making process was seriously flawed."
Commissioner Michael Fedorko was the sole vote against the license denial.
"A recommendation to deny licensure proposes an extraordinary result, which I believe goes far beyond what is called for in this case," Fedorko said.
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source: bizjournals.com
