Troubled Casino Struggles to Survive New Jersey Foreclosure

by Donald Hanz on States

Atlantic City, New Jersey’s first casino operator, Resorts Atlantic City is facing a threat of foreclosure from its mortgage servicer, Column Financial Inc. Because of this, the troubled casino has asked the New Jersey Casino Control Commission to block foreclosure attempts of Column Financial.

In its 20-page petition, Resorts Atlantic argued that Column Financial and its affiliates do not have or lack a state casino license which prohibits them from taking over the company’s distressed properties or its finances.

Based on this argument, Resorts Atlantic urged the commission to deny the foreclosure request of Column Financials. Alan C. Marcus of Resorts Atlantic said that without a license, Columns Financials and its affiliates do not have the legal right to operate a casino. He added that licensure is a fundamental element of the gambling industry in the state of New Jersey.

Since gambling was legalized in Atlantic City 31 years ago, the commission has not allowed any mortgage provider to foreclose on a casino.

In its petition, casino operator Resorts Atlantic pointed out that taking over a gambling operation through foreclosure violates the New Jersey Casino Control Act and would contradict the commission’s prior and precedent rulings.

Column Financials has filed a request before the commission to allow it to foreclose on Resorts Atlantic following the casino operator’s failure to pay the interest on its $360 million loan. Column Financials has also requested the commission to review the cash status of Resorts Atlantic to find the necessary amount to pay off its debt in case it refuses to resume paying its mortgage.

Resorts Atlantic has stopped paying on its mortgage since October 2008. The casino operator explained that it has decided to stop paying its mortgage to allow it to focus on operating expenses, taxes and payroll.

Resorts Atlantic has struggled to survive in the gambling industry that saw the emergence of modern casinos and to overcome the effects of the economic recession. In 2008, its gross revenue dropped by 16.3 percent to $233.2 million from the year ago.

Meanwhile, Resorts Atlantic has proposed to establish a reserve fund of about $15 million to pay winning bets and its operating expenses while the foreclosure case is going on.

The casino operator, in its petition, has disclosed the postponement of its negotiation for debt restructuring, prompting Column to attempt a foreclosure.