Summary
The Tropicana Casino in Atlantic City had its license application denied by NJ state Casino Control Commission. The Tropicana then filed an appeal using the emergency license application, which was denied by the NJ courts, which claim the Tropicana can follow the normal appeal process, which will take a few weeks to complete. A 1-year temporary license was also denied for reasons of "a lack of business ability, a lack of financial responsibility and lack of good character, honesty and integrity."
Analysis
The Tropicana Casino in Atlantic City had its license application denied by the NJ state Casino Control Commission. The Tropicana then filed an appeal using the emergency license application, which was denied by the NJ courts, which claim the Tropicana can follow the normal appeal process, which will take a few weeks to complete. A 1-year temporary license was also denied for reasons of "a lack of business ability, a lack of financial responsibility and lack of good character, honesty and integrity." Columbia Sussex, the present owner, will appeal the ruling.
The license was denied after a year of lay-offs, difficulty meeting state regulations for cleanliness and standards, and compliance with state regulations. A state appointed trustee has been appointed to take control of the property.
In Nevada state gaming officials have stated "We're going to take a look at what New Jersey had done in more detail," Neilander said. "There can be ramifications for a company conducting gaming outside of Nevada that has shown to have willfully violated gaming regulations."
The Tropicana has been trying to secure financing for a $2.5 billion redevelopment. "Deutsche Bank gaming analyst Bill Lerner said interest in the Atlantic City property will be high from potential buyers."
There is the possibility of sale of the Tropicana by Columbia Sussex, the present owner of the resort casino. Possible buyers that are being speculatively mentioned are David Cordish, Dennis Gomes, Pinnacle Entertainment, and Wynn Resorts.
When a lender makes a loan in a business venture like Tropicana, they are making an investment. The lender wants their investment to be successful. The lender is likely to extend the loans for the needed time period, at least until sale of the Tropicana can be arranged, rather then to pull the rug out from under their own investment. The other option is for the lending bank to take control of managing the Tropicana until a buyer can be found. However, it is unlikely the bank has the managerial expertise needed to manage the Tropicana. The financier is therefore likely extend credit until a solution is settled upon. Tropicana is an established brand name and resort, it is a "world class" resort casino. The Tropicana has great earning potential. The lender is not likely to sacrifice these benefits while a solution, even if it means sale of the Tropicana is possible.
What the Tropicana needs is new and improved management. The reasons for rejection of its license should never have occurred. They are management problems. Cleanliness, standards, regulations, respect for the state gaming commission, that resulted in financial difficulties causing lay-offs. Columbia Sussex, the present owners of the Tropicana, must straighten out their business operations, replacing, or retraining, the management that is responsible for the difficulties, and enforcing strict quality standards upon management that must be met.
What of the possibility of a sale. A resort casino like the Tropicana can definitely be sold, buyers will not be difficult to find. The Tropicana will continue in business, and shareholders will not lose their money if they they are smart in managing their shares, although there may be some turmoil in share prices.
Sale of the Tropicana is a final resort that may become necessary in this case. The first option is the replacement and retraining of management, and to extend credit until all legal appeals are settled, and either a buyer is found, or Columbia Sussex gets its business in order.
