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They burned the Monte Carlo ... and may get away with it
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They burned the Monte Carlo ... and may get away with it
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This could become a Hammer Studios-esque series of updates. Just contemplate the possible titles: The Curse of Columbia Sussex, Columbia Sussex Has Risen from the Grave, Taste the Blood of Columbia Sussex, Columbia Sussex and the Monster from Hell, Columbia Sussex Must Be Destroyed, Brides of Columbia Sussex, to be followed of course by Son of Columbia Sussex or even Jesse James Meets Columbia Sussex's Daughter ... culminating in the inevitable I Was a Teenage Columbia Sussex.
(OK, so Jesse James Meets Frankenstein's Daughter wasn't a Hammer movie, even if it was a real one, directed by the infamously expedient William, "One Shot" Beaudine. But you get the idea.)
Aaaaaannnnyyyyyway ... you'd think William Yung III's debt-lumbered lodging/casino company, with bondholders nipping at its heels, would be glad to get the cash it's due from the upcoming sale of the Atlantic City Tropicana. You would think wrong. Yung has thrown another hissy fit, in the form of a 60-plus page lawsuit. He wants that casino back and accuses the New Jersey Casino Control Commission of lacking impartiality, and also of "ad hoc rulemaking and standard-setting."
Barring a full reading of the complaint, the best line has to be the accusation that the NJCCC behaved in an "arbitrary, capricious and unreasonable" manner. Pot, thou hast called the kettle black! If anybody's operating methods are "arbitrary, capricious and unreasonable" it is those of Columbia Sussex, at least if its own testimony before the NJCCC is any yardstick.
"The one-member audit committee that Tropicana put in place in June of 2007 has been in widespread use by other New Jersey casinos," whines a company press release. Maybe so, but the problem with the Trop's ostensibly independent committee of one is that it consisted of an attorney (Jeffrey Silver) who was on retainer to Columbia Sussex, a conflict of interest that did not emerge until later that summer.
Oh, and anyway, "such a requirement is not sufficiently spelled out in the New Jersey Casino Control Act, and therefore is not something Columbia-Sussex could have complied with," according to a Philadelphia Inquirer report.
In other words, 'We didn't break the rules. And if we did, it's because we didn't know what they were.' (Funny how Columbia Sussex has butted heads with regulators in almost every state -- New Jersey, Indiana, Missouri and Nevada -- where it sought casinos of late. Must be a vast conspiracy, no?)
Another non-argument is the contention that the NJCCC didn't take into account a 94% occupancy rate. So? Harrah's Atlantic City runs at 90%+ but at least 70% of those rooms are comped. The company also complains that the NJCCC overlooked "the firm's financial stability," which may be a tough case to make when you're staving off bankruptcy.
In a final, maudlin touch, Columbia Sussex ends its press release by "decrying the virtual absence of interrogation about the company’s business plans and aspirations that is ordinarily a staple of renewal hearings."
Oh dear, this is too tragic. Yung is conveniently forgetting that his stewardship of the Trop was hanging by a thread when he came before the NJCCC. The latter had been presented with a recommendation from the New Jersey Division of Gaming Enforcement that Columbia Sussex be allowed a provisional, one-year renewal -- based on the satisfaction of 26 conditions. In other words, Yung's best hope was to get off with probation, and he didn't. (Trop lawyers asked for a five-year, unconditional renewal but, given the circumstances, that was an unrealistic expectation.)
What might those "aspirations" have been? Yung had already sent the property Columbia Sussex described "as key to the company's future, generating more than a third of total operating revenue and 36 percent of total operating profits" into a tailspin, off $19 million in the first six months of last year.
His Tropicana Entertainment casino portfolio was down -5.6%, year over year, for that same period despite adding four ex-Aztar Corp. properties to its stable. What The Press of Atlantic City called Yung's "slash-and-burn business model" was fluffing up profit margins in the short term, but at the price of depressed revenues.
By the third quarter, not only were revenues down even further (-9% Y/Y), so were profits (-8%). In what looked like a desperation move, Yung started to peddle the Atlantic City Trop's most highly praised asset, its $280 million The Quarter, to pay down debt. (He was subsequently dissuaded, perhaps because the first offer he got was for only $70 million.)
Anyway, it seems that Columbia Sussex's attempted default on its $750,000 fine to the State of New Jersey was just a ploy to buy time until its lawsuit was filed. If so, the NJCCC has decided that two can play that game. Overruling its own conservator, it has ordered Columbia Sussex to pay up, starting now -- even if it means dipping into the Trop's cash flow. Such regulatory choler is not difficult to understand, as it appears that stalling on the initial $125K payment was yet another chapter in a long history of Yungian dissembling when it comes to cooperating with the Garden State's regulatory structure.
In the most recent issue of Casino Lawyer, respected attorney Frank Catania uses Columbia Sussex as "a textbook example of how to lose a casino license." Catania's analysis doesn't bode well for Yung's chances in a court of law, as he finds that Yung's "arrogance was reflected in [Tropicana Casino Resorts'] poor presentation at Tropicana's licensing hearing, where the testimony of the company's witnesses was found to be poorly prepared, inaccurate, evasive, unbelievable, hollow and, in one instance, perjurious."
Or, as one NJCCC member wrote, "I was left with the impression that the applicant felt that the process was just an inconvenient formality."
Yung might also want to stock up on ginko biloba before he gives any further testimony, too. Before the NJCCC, he pleaded to being ignorant and out of the loop on how his company operated -- a sorry performance by the president, CEO and sole director of Tropicana Entertainment.
However, before Yung gets his day in court, he's got until the end of the month to A) restructure $690 million in debt or face Chapter 11 and B) sell his Casino Aztar riverboat before the State of Indiana seizes it. So what's Yung's endgame?
That's a subject for another day ... although a small casino up at Lake Tahoe could hold the key to Columbia Sussex's fate.