Atlantic City hotel-casino faces bankruptcy

Adam Steinhauer

Wednesday, July 28, 1999 | 11:18 a.m.

ATLANTIC CITY -- Claridge Hotel & Casino Corp., owner of the smallest casino in Atlantic City, said it expects to miss a payment on its mortgage notes and to file for bankruptcy protection.

The Atlantic City-based company also said it signed a letter of intent to receive "a meaningful investment" from Schottenstein Realty Corp., controlled by Miami real estate investor Jeffrey Schottenstein, after its debts are restructured.

The Claridge Casino Hotel has been unable to compete with bigger, more spectacular properties in the United States' second-largest gambling market, such as Bally's Park Place located next door, analysts said. The Claridge has also suffered from its out-of-the-way location, a half-block off of the famed Boardwalk.

"What's needed in the business is bigger gambling facilities, more glitzy casinos," said Sean Egan, managing director of Egan-Jones Rating Co. in Berwyn, Pa. "The critical mass has passed the company by."

Closely held Claridge said it plans to meet with creditors to re-negotiate its debts in the next several weeks.

Claridge said its net loss shrunk to $269,000 in the second quarter, from $395,000 in the year ago period. Cash flow, or earnings before interest, taxes, depreciation and amortization, declined 5.6 percent to $3.4 million from $3.6 million. Casino revenue declined 0.5 percent to $43.5 million from $43.7 million.

Claridge expects to miss a $5 million payment due Aug. 2 on its mortgage notes that are due 2002, spokesman Glenn Lillie said. The company expects to file for protection under Chapter 11 of the U.S. Bankruptcy Code to help it restructure debts.

Schottenstein, whose family controls Value City Department Stores Inc., couldn't be reached for comment.

Claridge believes that billionaire financier Carl Icahn controls as much as 40 percent of its mortgage debt, it said in a U.S. Securities & Exchange Commission filing last year. Icahn has invested in several struggling casino companies and currently owns the Stratosphere Tower and Arizona Charlie's hotel-casinos in Las Vegas.

He couldn't be reached for comment.