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Revel AC Inc. will seek to sell its assets during its second trip through Chapter 11 with the aid of $125 million in debtor-in-possession financing that rolls up much of its prepetition debt.
Chief Judge Gloria M. Burns of the US Bankruptcy Court for the District of New Jersey in Camden was set at a Friday, June 20, hearing to consider the companys first-day motions for use of cash collateral and postpetition financing as well as joint administration of Revels case with those of five affiliates.
The owner of the Revel Casino Hotel in Atlantic City, NJ, filed for bankruptcy again on Thursday, just 13 months after completing a Chapter 11 case that cut its debt to $272 million from $1.5 billion.
The company filed a prepackaged case on March 25, 2013, in the same court, predicated on a debt-for-equity swap implemented May 21, 2013. Senior secured term lenders owed $896 million received 100% of the equity in the reorganized company. Second-lien lenders received a pro rata share of contingent payment rights, and general unsecured creditors were to be paid in the ordinary course of business.
Chief restructuring officer Shaun Martin of Winter Harbor LLC said in a Thursday declaration, however, that despite the debt reduction, the company still projected operating losses to continue through 2013.
Martin said the company therefore attempted to reduce its operational costs and shift from leisure-related services to focus on gaming. Revel laid off 18% of its employees, fired its talent buyer for events and moved the operations in-house. The debtor said it brought in a gaming consultant to improve its online presence and since exiting Chapter 11 has implemented a new filtration system for its smoking areas, invested in new signage, eliminated an underperforming poker room and improved its food options and its reward program.
Nevertheless, limited liquidity late last year forced Revel to amend its first- and second-lien debt.
First-lien lenders with JPMorgan Chase Bank NA as administrative and collateral agent on Nov. 8 upped the commitment on a $75 million revolver to $100 million and split the debt into a $25 million Tranche A-1 accruing interest at Libor plus 6% and a $75 million Tranche A-2 accruing interest at Libor plus 6.5%. An additional $50 million Tranche B term loan is priced at Libor plus 9%, with the entire commitment to mature on June 30, 2015, rather than the initial May 21, 2017, maturity date.
The increased financing required the debtor to retain an investment banker, and Revel hired Moelis amp; Co. LLC. The first-lien debt stands at $137 million.
The key terms of a $275 million second-lien term loan facility led by Wilmington Trust NA remained unchanged. The loan accrues interest at either 12.5% if paid in cash or 14.5% if paid in kind. The debt matures on May 21, 2018, with $310 million outstanding.
Wells Fargo Principal Lending LLC and JPMorgan are providing the DIP, with Wells Fargo Bank NA as administrative and collateral agent. With a total commitment of $125 million, the DIP would roll up $10 million of Tranche A-1 owed to JPMorgan and $73.1 million of Tranche A-2 owed to Wells Fargo, with $41.9 million in new cash available from Wells Fargo.
The debtor could use $23.5 million in new money with an interim order. Of the new money, $1.9 million would be available as letters of credit.
The DIP would accrue interest at Libor plus 6%, with interest increasing 2% on default. The loan carries an unused commitment fee of 4% on the new money, an unspecified upfront fee and a 6% letter of credit fee.
The DIP sets a number of milestones for the sale of the companys assets. The debtor must file bidding procedures by Sunday; win approval of bid procedures by July 11; and win final DIP approval by July 24. The financing requires a bid deadline by Aug. 3; an auction within five days of the bid deadline, a sale order by Aug. 23 and a sale closing by Oct. 14.
Although Revel has no stalking horse lined up, court papers show prepetition negotiations and expressions of interest are promising indications of the value of the debtors assets.
Revels estate would wind down following the asset sale, with a prearranged liquidation plan distributing the proceeds.
Under the plan, submitted Thursday, administrative, priority and nonlender secured claims would be paid in full on the effective date.
Tax claims would be paid in full within five years of the effective date.
First-lien lenders would receive a pro rata share of sale proceeds. Second-lien lenders would receive the same treatment once first-lien holders had been paid in full and general unsecured creditors the same once both classes of secured lenders had been paid in full.
Equity holders would be wiped out.
Revels resort has more than 1,800 ocean-view guest rooms and a 130,000-square-foot casino. It has more than 2,000 slot machines, nearly 100 table games, electronic tables and a poker room in its smoke-free resort. It acquired the unfinished property from affiliates of Morgan Stanley in February 2011 after roughly four years of construction.
At the time, Revel and New Jersey agreed to a deal under which the casino operator would receive about $261.4 million in grants to revitalize Atlantic City and its declining gaming market, which was then in a five-year slump. Revel opened its casino on April 2, 2012.
Revel listed $500 million to $1 billion in assets and liabilities in its petition.
The companys largest unsecured creditors are ACR Energy Partners LLC (owed $9.6 million), National Union Fire Insurance Co. of Pittsburgh, Pa. ($5.93 million), PHD Media LLC ($2.03 million), Atlantic City Alliance ($999,259) and the New Jersey Department of Labor and Workforce Development ($895,061).
The companys largest equity holders include Chatham Asset Management LLCs Chatham Revel VoteCo LLC, with a 27.4% stake; Canyon Capital Advisors LLCs Canyon RC Holdings LLC, with 15.7%; and Capital Group Cos. American High-Income Trust, with 11.5%.
Debtor counsel Richard S. Kebrdle of White amp; Case LLP and Michael J. Viscount Jr. of Fox Rothschild LLP were not available for comment.
John K. Cunningham and Kevin M. McGill of White amp; Case and Raymond M. Patella of Fox Rothschild also are debtor counsel.
Thomas Kreller of Milbank, Tweed, Hadley amp; McCloy LLP represents Wells Fargo.
ACR Energy Partners LLC
Canyon RC Holdings LLC
Chatham Revel VoteCo LLC
JPMorgan Chase Bank NA
Judge Gloria M. Burns
Moelis Co. LLC
National Union Fire Insurance Co.
Revel AC Inc.
Revel Casino Hotel
Wells Fargo Principal Lending LLC
Winter Harbor LLC