Kerzner seen backing out of U.S. gambling industry with AC sale

Friday, Oct. 6, 2000 | 11:17 a.m.

SUN STAFF AND WIRE SERVICES

ATLANTIC CITY -- South African gambling magnate Sol Kerzner's Sun International Hotels Ltd., which backed out of a deal to buy the Desert Inn hotel-casino in Las Vegas this year, is now in talks to sell its Resorts International hotel-casino in Atlantic City.

Tom Barrack, chairman of Colony Capital LLC of Los Angeles, is negotiating for Colony to buy the property. Colony is the company that controls Harveys Casinos Resorts, a casino company based in Lake Tahoe, Nev. Harveys is already buying casino operator Pinnacle Entertainment for $1.28 billion.

Barrack hopes to buy the casino at a discount from the more than $400 million that Sun International has invested in it, the Wall Street Journal reported, citing people close to Colony.

Barrack hopes the purchase will finally give him a foothold in a major gambling destination, the Journal said, quoting people close to him. He has made several unsuccessful offers to buy Trump Hotels & Casino Resorts Inc. from Donald Trump.

Kerzner, Sun International's chairman and majority shareholder, has struggled with the New Jersey property for several years -- beginning with a casino-licensing investigation in which New Jersey regulators questioned several of his former business deals in South Africa.

Some observers see the sale of the Resorts property as part of pattern in which Kerzner appears to be ending his bid to be a major player in the U.S. gaming industry. Besides dropping his bid for the D-I on the Las Vegas Strip, Kerzner's involvement in the giant Mohegan Sun Indian casino in Connecticut has been reduced.

The Mohegan tribe terminated its management contract with Trading Cove Associates, in which Sun was a 50 percent partner, to run the casino. Trading Cove had been entitled to between 30 percent and 40 percent of the operation's net profit, but now receives 5 percent of gross revenues.

Standard & Poors on Wednesday placed Sun International Hotels corporate credit, bank loan and subordinated debt ratings on CreditWatch with negative implications because of the Atlantic City sales talks.

S&P said a sale of Resorts to Colony would further increase Sun's reliance on its flagship resort, Paradise Island, which is in the Bahamas.

A sale could increase Paradise Island's contribution to Sun's cash flow from 77 percent to 90 percent, S&P said.