Aztar gains funds to renovate the Tropicana

Gary Thompson

Tuesday, June 2, 1998 | 10:39 a.m.

Aztar Corp. took another big step Monday toward the possible transformation of its strategically located but under-performing Tropicana Las Vegas into a competitor to the new wave of hotel-casinos under construction here.

Aztar said it has completed a $363 million financing package that includes $175 million of new capital available for expansion or redevelopment.

Theoretically, the money could be used to exercise Aztar's option to buy the 50 percent stake it doesn't already own in the partnership controlling the 34-acre site at the southeast corner of Tropicana Avenue and Las Vegas Boulevard.

Last February, Aztar said it had acquired an option to buy the interest from Chicago's Jaffe family for $120 million. If it exercises the option, which expires in August 1999, Aztar is expected to develop a new resort in a joint venture with an as-yet unidentified partner.

Joe Cole, Aztar's vice president of corporate communications, said the company has retained the Goldman Sachs investment banking firm to help identify a strategic partner for the redevelopment project.

But no decisions have been made yet on whether to buy the Jaffe interest or proceed with a new project, Cole said.

He said Aztar will watch the Las Vegas market closely to determine if the new resorts already under construction stimulate growth in visitor volume or exacerbate the current glut of hotel rooms.

The bulk of the new credit facilities is being provided by Bank of America, Bankers Trust, Societe General, Bank of Scotland, Credit Lyonnais, PNC Bank, ABN Amro Bank, Imperial Bank, Key Bank and Mitsubishi Trust & Banking Corp. The rest is being provided by institutional lenders.

The package includes a five-year $250 million revolving credit facility, a seven-year $50 million term loan provided largely by institutional lenders, and extension of the term of a $63 million loan on the Las Vegas property to June 2003.

Aztar Chairman Paul Rubeli said the new credit agreement provides terms "considerably more attractive than the previous facility and reflects the heightened interest that Aztar now enjoys in the commercial banking and institutional markets."

Aztar reported first-quarter net income of $618,000, or 1 cent a share, compared with break-even results in the 1997 first quarter. The gain stemmed largely from improved operations at the Atlantic City Tropicana. The Las Vegas Tropicana posted a $3.5 million operating loss for the 1998 first quarter.