Playboy Tangles With Casino in Chapter 11
Elsinore’s Atlantis Casino Hotel has become the first gaming hall in this resort to seek protection from creditors under federal bankruptcy laws, but an analyst said Friday that the action may not be enough to save the casino.
Elsinore Corp. officials said in a statement that their Chapter 11 petition, filed in U.S. Bankruptcy Court in Camden, N.J., was precipitated by Playboy Enterprises filing an involuntary bankruptcy petition against an Elsinore subsidiary, Elsub Inc., earlier this week.
The statement also said that the Atlantis “would continue to operate in the ordinary course of business as a debtor-in-possession and that sufficient funds were available to continue to operate the casino hotel.”
Chapter 11 permits businesses to operate without threat of lawsuits by creditors and to develop plans for reorganization and for satisfying debts.
The Chapter 11 petition was filed by Elsinore Shore Associates, a partnership that has as general partners subsidiaries of Elsinore Corp., including Elsub. Elsinore Shore Associates are the owners and operators of the Atlantis.
Court papers said that, as of Sept. 30, Elsinore Shore Associates had total assets of about $170.8 million and total liabilities of about $238.8 million, including long-term debts of more than $192.5 million.
The partnership had secured debt of $90 million and unsecured debt of about $102.5 million. Playboy, which has unsecured debt, said it is owed about $40.5 million in principal and interest on a $45.3-million promissory note signed by the companies in 1984 when Elsinore bought out the interest of Playboy, its former partner.
State gaming regulators refused to grant Playboy a casino license because its founder, Hugh M. Hefner, allegedly attempted to bribe public officials in New York state in 1961.
Marvin Roffman, an analyst with the Philadelphia firm of Janney Montgomery Scott, said a casino in bankruptcy court is not alluring to gamblers.
“Most gamblers are very superstitious people,” Roffman said, adding that a number of gaming halls in Las Vegas have filed for bankruptcy.
“They feel uncomfortable, and history has borne this out . . . bettors don’t feel comfortable going into an establishment that is in bankruptcy court.”
Added to that, he said, are problems created by low staff morale and the facility’s often-cited drawbacks of a three-level gaming hall that has not been popular with gamblers, as well as a lack of parking facilities.
Roffman also pointed out that the casino’s secured creditors, who hold $115 million in bonds sold last year, have the senior lien on the property and could choose to foreclose on it rather than accept a reorganization plan.
