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Friday, May 15, 2009 | 3:52 p.m.
Sun Archives
- Tropicana reorganization plan gets court’s OK (5-5-2009)
- Tropicana creditors want Vegas property split from company (3-24-2009)
- Tropicana could emerge from Chapter 11 in May (3-6-2009)
- Tropicana hires branding firm to focus on value (2-3-2009)
- Plan would give Tropicana creditors ownership stake (1-13-2009)
- Tropicana names president of Vegas resort (1-6-2009)
- Tropicana conservator enters negotiations on N.J. property (9-23-2008)
- New blood helped Tropicana, union heal old wounds (8-27-2008)
Gaming newcomer Onex Corp., a private equity firm with $10 billion under management, says it's proceeding with plans to take over the Tropicana hotel-casino in Las Vegas as the property emerges from bankruptcy protection.
The Toronto company this week said it's been accumulating Tropicana debt and expects to take control of the property this year, subject to regulatory approvals and finalization of the bankruptcy case.
The Tropicana investment will be made by the company's third large-capitalized private equity fund, Onex Partners III, in what Onex called "a distressed-for-control opportunity in the currently out-of-favour gaming sector."
Onex has accumulated -- at a discount -- more than $200 million in principal of the senior debt of Tropicana Las Vegas Resort and Casino LLC, which is secured by the 1,850-room hotel and casino on the Las Vegas Strip. Onex didn't say how much it paid for that debt, which gave it a controlling interest.
On May 5, the bankruptcy plan of reorganization was confirmed for the Tropicana and its sister properties around the country. The reorganization calls for various owners to take over various assets around the country.
The Las Vegas Tropicana deal for Onex includes 34 acres of land surrounding the hotel-casino.
Court papers show Onex will control three of the five seats on the newly reorganized Tropicana Las Vegas board of directors. As previously disclosed, former MGM Mirage executive Alex Yemenidjian will be the property's chief executive and run the gaming operations.
The property's creditors say the resort on the Strip generated revenue of $118.5 million in 2008, yielding cash flow of $4.5 million and a net loss of $4.7 million after expenses were deducted for depreciation and restructuring costs.
An analysis for the bankruptcy case found the property is worth from $360 million to $380 million. Tropicana's creditors said the new company would potentially have rights to any damages won in litigation against former Tropicana Entertainment owner William Yung III, whom they claim mismanaged the company.
With this valuation, the main lenders in Las Vegas hope to recover up to 85 percent of the debt outstanding on the property, compared to a projected 70 percent if it was liquidated.
In a court filing, Scott Butera, who has been running the nationwide Tropicana Entertainment company as chief executive, said he supported the creditor-approved reorganization plan and management of the Las Vegas property by Yemenidjian and Onex executives.
"The plan furthers the goal of restructuring the ... debtors' obligations and businesses in a manner that makes economic and business sense and maximizes the value of their estates," he said, referring to the various corporate entities that control the Las Vegas Tropicana.
"The plan provides (the property) with a completely deleveraged capital structure. ... The reorganization ... contemplated in the plan ensures that the ... debtors will emerge from bankruptcy as a going concern with sound management and a capital structure that is predominantly equity with which to operate the Tropicana Las Vegas and provide livelihoods for their approximately 1,800 employees."
Besides praising Yemenidjian's experience at MGM Mirage, Butera said "Gerald Schwartz and Timothy Duncanson, chief executive officer and managing director of Onex Corp., respectively, are experienced investment professionals who have consistently studied casino gaming operations, with a strong focus on the Las Vegas market in particular."
Onex said in a regulatory filing:
"The plan provides for the secured creditors, including Onex and the other holders of the US$440 million term loan, to receive 100 percent of the equity in the Las Vegas property. ... We believe that the pro forma company will be well positioned for a turnaround and able to withstand the current downturn in the Las Vegas market as it will have no debt, slightly more than US$20 million in cash and a working capital facility to be put in place shortly."
Tropicana Las Vegas sits on the south-east corner of Tropicana Avenue and Las Vegas Boulevard, an intersection which has the most adjacent hotel rooms in the world, also making it one of the most busy. The hotel has 1,658 rooms, three restaurants, a 62,011-square foot casino and a spa.
The Tropicana's five-acre pool complex stretches throughout the center of the the hotel/casino and remains it's most recognizable feature. It features swim-up blackjack during the summer months, a swim-up bar, dining areas and a wedding chapel. The Tropicana is also home to Brad Garrett's Comedy Club. For pre-show dining, take advantage of one the casino’s dinner and a show packages or just head over to Cafe Nikki, Biscayne Steak, Sea & Wine or Bacio Pasta & Vino.
So then perhaps the first question is, what happens to the current management team there at the Trop? I would imagine line level employees are generally safe. any thoughts?
Despite Wall Street's love for blood there is less mismanagement than the high turnover rate in the gaming industry would suggest. In the "old days" a casino's performance was closely aligned to the expertise of the casino floor managers. The rising tide that lifted all boats for decades has changed and is separating the men from the boys but for the most part casino floor operations are sound. In the modern area the fate of the operation moved upstairs to the executive offices, particularly the financial structure. Yemenidjian will surround himself with those he felt most comfortable with during his MGM years. Our unforgiving economy requires a diligence many managers and line staff are unaccustomed to.
The Tropicaca hasn't been the same since they got rid of Franco Deliz's free show.
Paladin0711 wrote:
"So then perhaps the first question is, what happens to the current management team there at the Trop? I would imagine line level employees are generally safe. any thoughts?"
For the sake of survival of the Trop, let's hope there is a massive house-cleaning of management and "line level" employees. This property has suffered for years from bad attitudes among the vast majority of front-line people, which has chased off many patrons. It needs a clean sweep from shift managers on down to the dealers, if it has any hope of luring back significant numbers of customers.
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Opinions and Commentary on the Gaming Industry: www.TheBearGrowls.com
I agree with LVBear. I used to go into the Trop, but when I suggested to another player that he needed to hit a soft 16 the dealer got upset and told me the player needed to play his cards with outside help, I asked to talk to a supervisor, and sure enough he said the same thing. I could not take any more, I walked out and never went back. This is not unique but among the worst.