Yesterday, once further details had been released about the potential purchase of the Tropicana Casino and Resort by Baltimore developer Cordish Co, Tropicana Entertainment issued a statement contesting the terms of the agreement. The statement commended Justice Gary Stein, trustee for the Tropicana in Atlantic City, for disclosing some of the terms under which Cordish proposes to purchase the property but insists that in the public interest full disclosure should be made. Last December the parent company of Tropicana Entertainment was stripped of its casino license after cleanliness problems and poor compliance with New Jersey gambling rules.

However, the Cordish deal, which includes spending an extra $100 million to upgrade the Tropicana if the purchase goes through, is thought by Tropicana Entertainment to undervalue the property. “We continue to have grave concerns about the credibility and financial viability of the terms itemized in the Justice’s update released earlier today. Today’s disclosure does nothing to allay our worst fears about the fire-sale nature of the current process. In fact, the partial disclosure of terms raises many red flags and leaves many questions unanswered.”

The statement continues: “For one thing, there does not appear to be a formal “offer” to buy the casino, but rather an expression of interest that is being used to see if the conservator is desperate enough to accept a “low-ball” bid. The $700 million purchase price is illusory, too, as $250 million is simply an “IOU” that Cordish expects Tropicana to accept as part of the price with no collateral from Cordish to back it up. In today’s financial environment, it is extremely difficult to apply a value to this kind of IOU.”

Tropicana Entertainment believes the second Cordish offer of an all-cash price of $575 million is very low and requires further explanation. It is also concerned that Justice Stein has not revealed how or whether Cordish can obtain the necessary financing to complete the transaction. “Cordish seems to be acting like a home buyer who makes an offer without earnest money or a mortgage commitment. We must presume as well that there are stipulations and contingencies with respect to the completion of due diligence. Every stakeholder deserves to know what those provisions are.”

“The prospect of selling the casino at a price so obviously below its true value serves no one’s interests, least of all those of taxpayers and City government who must be concerned that a fire sale of the assets could lead to an endless round of appeals for lower taxes by Atlantic City’s other casinos. If successful, those appeals could devastate the City’s finances, drive non-casino property taxes to unprecedented levels, and place a crushing new tax burden on families and businesses.” (E-09.30.08)

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