Wells Fargo's Patience Is Key to Revel's Future

By Tom Corrigan 

Following the collapse of yet another deal to sell Atlantic City, N.J.'s defunct Revel Casino Hotel, time may be running out for the resort to find a savior.

Revel, which has seen two bankruptcy court-approved deals fall through, must once again begin discussions with potential buyers. And with no other proposed buyer yet to emerge, Revel's continued survival is heavily dependent on primary lender Wells Fargo & Co.'s willingness to continue to provide funding.

Though Revel shut its doors in September leaving thousands out of work, millions of dollars in legal expenses and utility payments continue to accrue each month. Much of that has been paid for by the Wells Fargo loans.

"Wells Fargo has to make this calculated decision about whether to fund losses with the hope they will be able to make up those losses with an increased purchase price," said Joel Levitin, a lawyer at Cahill, Gordon & Reindel who isn't involved in the case. "That's a difficult call for a party in that situation to make, and they probably revisit that decision every day."

A spokeswoman for Wells Fargo declined to comment Monday.

Shaun Martin, Revel's chief restructuring officer, said at a hearing last week that no formal offers have been made for Revel, but that there have been "a lot of inquiries." If a buyer can't be found, Mr. Martin said that the resort could be forced into liquidation.

Two previous deals to sell the property--the first to a Canadian private-equity firm and the second to a Florida-based developer--fell apart over disputes with the former tenants and ACR Energy Partners LLC, the operator of the power plant that supplies Revel's electricity and hot water.

Any new deal or conversion of the case to a chapter 7 liquidation would be subject to approval by Judge Gloria M. Burns of the U.S. Bankruptcy Court in Camden, N.J.

On Wednesday, Judge Burns will hear arguments over a settlement Wells Fargo reached with Revel and its unsecured creditors last month over a hotly contested $125 million financing package for the closed resort.

The deal has been met with resistance from ACR Energy Partners as well as other former tenants who say the financing pact, which prioritize the bank's debt ahead of other creditors, will leave them with little or nothing.

But without the additional security, Wells Fargo may be less inclined to continue to fund Revel's case, sources familiar with the case say.

Under the proposed settlement, Wells Fargo will share $1.35 million of any sale proceeds with unsecured creditors. The bank also agreed to set aside an additional $150,000 of sale proceeds to fund possible litigation that could lead to greater returns for creditors.

Revel, which cost $2.4 billion to build, opened in the spring of 2012. It filed for Chapter 11 protection for a second time in June of last year.

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