Joys, Shakespeare famously wrote, come as solitary spies while griefs arrive by the battalion. So it is with Atlantic City, where the bad news washes up along the Boardwalk in bunches. If you picked Resorts Atlantic City as the Casino Likeliest to Be Seized, you've just won the office pool.
In what would be an historic first, Resorts' mortgage holder wants Colony Capital — which has missed three straight payments — to surrender title to the property. Failing that, the New Jersey Casino Control Commission has been asked to sanction the seizure of the casino. And if Plan B doesn't work, Column Financial threatens to dispatch its agents on "cash sweeps" across the property. That's right, money could be commandeered straight from the casino floor in a forcible attempt to hold Colony to account.
If that seems harsh, imagine what might happen to you or I if we skipped 90 days' worth of house or car payments. Having snagged Resorts for a bargain-basement $140 million, Colony Capital proceeded to lumber it with 2.6X debt. It's the classic American story of our decade: mortgaged to the hilt, maxed out on the credit card and with no way to pay.
Should Column be successful in either of its first two proposed scenarios, it won't mean the end of Atlantic City's oldest casino. Colony's loss would become a nice little management contract for somebody else. (Maybe thrift-consicous soon-to-be-ex-Cannery Casino Resorts owners William Paulos and William Wortman should volunteer for the gig.)
With insolvency literally at Resorts' doorstep, the Tropicana in Chapter 11 and three Trump Entertainment Resorts casinos headed that way, Atlantic City faces a depressing prospect: Five of its 11 casinos could easily be in either bankruptcy or foreclosure by the end of next month. The market has boiled down to the Haves (Boyd Gaming, Harrah's Entertainment) and the Have-Nots (everybody else). As David Schwartz points out, while Pinnacle Entertainment may not have done itself a favor by tearing down the Sands, it probably kept the other small fry afloat that much longer.
