Tropicana Entertainment plan calls for company split, loss of owner’s interest

Tropicana Entertainment has submitted a reorganization plan that would split the company into two and leave the company's embattled owner without any ownership interest in the reorganized company.

Bill Yung III's proposed loss of interest, which he has agreed to, would be the final blow for the hotelier who tried to expand his gaming holdings through the $2.1 billion buyout of Aztar Corp. in January 2007.

The company has been trying to restructure part of the $3 billion debt load, which stems from that buyout, since filing Chapter 11 bankruptcy in May after losing its license to operate the Tropicana in Atlantic City.

Scott Butera, Tropicana Entertainment's chief executive officer, said he hopes the plan that was submitted Monday is more than just "a jumping off point."

The proposal, according to Barbara Cappaert, a bond analyst with KDP Investment Advisors, will likely be the first of many plans to be submitted before the debtholders can agree upon a reorganization plan.

Cappaert said in a note to investors the plan is "short on details and valuations," and warns the reorganization could drag on another one to two years.

Butera disagrees.

"We have spent a lot of time working with our creditors about developing this plan," Butera said. "There may be some groups that are happy and there may be some groups who want to get more value."

A hearing is scheduled for Jan. 17 for the bankruptcy court to decide if the plan discloses enough details for interested parties to make an informed decision about the proposal.

The reorganization plan divides the company into two holding companies: one holding 10 casinos and the other holding the Tropicana on the Strip, much like its current debt is structured.

Under the plan, the Strip property's $442 million secured debt would be converted to equity.

Tropicana also anticipates making $275 million in capital investments over the next five years to refurbish and revamp its casinos and resorts.

"We feel what we've put forth represents the current values of what the company can sustain going forward," Butera said. "The idea was to come up with a plan to put the company in position get through what is a very difficult operating environment and have capital to grow in the future."

The plan proposes that Tropicana Entertainment own and operate the Atlantic City property, something it currently does not do.

The New Jersey Supreme Court in November upheld state casino regulators' December 2007 decision to strip the Yung-run company of its license and put the property up for sale.

A new board of directors and company executives, led by Butera, have asked New Jersey regulators for a ruling on the new organization's suitability to hold a license.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.