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ATLANTIC CITY - In the latest financial crisis to jolt the gaming industry, Atlantic City's smallest casino has defaulted on its mortgage as it struggles to compete in the land of the giants.

The Atlantic City Hilton Casino Resort disclosed in a financial statement filed with the state Casino Control Commission that it failed to make its monthly loan payment July 9 due to the "severe impact of the current economic conditions."

The casino noted it is in negotiations with its lender to revise the terms of the mortgage agreement. As of June 30, its outstanding debt under the loan was $348.2 million, plus $868,000 in accrued interest, according to the financial statement.

Nicholas L. Ribis, chief executive officer of the Hilton, said Friday the casino would continue with "business as usual."

"Our day-to-day operations will continue without interruption and seamlessly," he said. "For our employees and customers, there is no change."

Daniel Heneghan, a spokesman for the Casino Control Commission, said the agency has been in contact with the Hilton, but no regulatory action is anticipated at this time.

"We have been monitoring their financial condition very closely. We will continue to do so," Heneghan said.

This week, the commission reported that the Hilton fell to a gross operating loss of $603,000 in the second quarter, compared to a profit of $4.2 million in the same period last year. Through the first six months of 2009, the Hilton has posted a gross operating loss of $9 million, compared to a profit of $8.4 million for the same time a year ago.

Hilton is owned by an affiliate of Colony Capital LLC, a Los Angeles-based private real estate investment firm that has struggled in the ultra-competitive casino industry. Now quaint by modern standards, the Hilton features a modest 800 hotel rooms and only 60,000 square feet of gaming space with a 1980s-era decor that reflects its beginnings as the Golden Nugget casino.

Colony Capital also owns Resorts Atlantic City through another affiliate, but agreed this month to let the lenders take over the property after the casino defaulted on its $360 million mortgage and faced foreclosure. The Casino Control Commission is scheduled to vote Wednesday on Resorts' request for the lenders to take control.

Other Atlantic City casinos have been battered by the recession and stiff competition from slot parlors in Pennsylvania. For the year, gaming revenue has plunged nearly 15 percent industrywide.

The three Trump Entertainment Resorts Inc. casinos missed making a $53.1 million debt payment last December in a prelude to their Chapter 11 bankruptcy filing in February. Donald Trump and an affiliate of Dallas-based Beal Bank have offered to buy Trump Entertainment out of bankruptcy for $100 million and take it private.

J. Carlos Tolosa, president of the Eastern Division of Harrah's Entertainment Inc., said things appear particularly grim for the Hilton and Resorts. Tolosa, whose company owns the Harrah's Resort, Bally's, Caesars and Showboat casinos, predicted that the Hilton and Resorts may not survive in the next few years.

"My sense is that at least two casinos will close - Hilton and Resorts," Tolosa said. "All you have to do is look at their dismal financial performance."

Hilton has been the worst performer among Atlantic City's 11 casinos. Its gaming revenue has plummeted 25 percent in the first six months this year. Resorts is not far behind, with a 22 percent decline.

Hilton has been hindered by its small size and relatively remote location at the southern tip of the Boardwalk. Plans for a $1 billion expansion, including a new 1,000-room hotel tower and a doubling of its casino space, fell through early last year after the economy began to falter.

Colony Capital owns the Hilton through its Resorts International Holdings LLC affiliate. Colony acquired the Hilton and three other casinos in Mississippi and Indiana in 2005 for $1.24 billion. It sold one of those casinos, Resorts East Chicago, in East Chicago, Ind., to Ameristar Casinos Inc. in 2007 for $675 million.

Proceeds from the East Chicago deal were supposed to help finance the Hilton's makeover, but the plan was shelved. Hilton last underwent a major expansion in 1997, when it added 300 hotel rooms at a cost of $50 million.

The property opened in 1980 as the Golden Nugget, casino mogul Steve Wynn's luxury resort. Wynn sold the casino for $440 million to Bally Manufacturing Corp. in 1987, beginning a string of ownership and name changes that tainted its reputation. It became the Hilton in 1996 after another ownership switch.

E-mail Donald Wittkowski:

DWittkowski@pressofac.com

20 comments:

• vwsteve (99) posts 2:28 pm

  Niky...your description of AC sounds like Newark...only without the casinos.

• zebra2 (109) posts 9:35 am

  $50 in tolls? I think not! And $400. hotel rooms? I just got back from an AC casino, $60.00 for an oceanfront view. I say keep on jacking up the price on the no brainers from Philly. Their loss is my gain..

• pawins (7) posts 8:17 am

  South Jersey couldn't support the Surf, or Boardwalk Bullies, seagulls, or whatever the football team in convention hall was. They won't even keep the restaurants open, much less megacasinos. and table games ARE coming to PA.

• JohnSA (31) posts 7:55 am

  I don't know where you are coming from to spend fifty bucks in tolls and parking fees. That is more than what it costs in tolls from Northwest Ohio to Atlantic City. At least toll roads are pretty well maintained compared to non-toll highways and bridges, so you shouldn't cry over a few bucks. I really can't see the demise of Hilton and Resorts just yet. Hilton is the only Boardwalk casino where it is relatively safe at night to wander off into the surrounding area. Walk out of Showboat at 1:00a and head up Oriental and then towards the liquor store on New Hampshire. It ain't my idea of a nice evening walk. This is where the city's problem lies. The neighborhoods are where the city needs to concentrate it's efforts. All of this crap along Pacific, which should have been addressed in the seventies, needs to be wiped-out. The parts of the Inlet that haven't been taken care of should be cleaned-up before Revel opens. Neighborhoods like Back Maryland which are run by criminals and thugs need to be swept by police and given back to the decent people who still live there. Criminals like Langford need to be run-out of town on a rail, along with thugs like Steve Young. Until Atlantic City changes it's image, with few exceptions, as politically corrupt and a dump outside of the casinos, it is going to have a tough go of it. I do, however, see things looking better in the future. We will see after the up-coming election how much the people really want the city to progress. Hopefully, it will be a start.

• JoeBrokeler (101) posts 7:32 am

  Nick Ribis was my waiter last night. There is a guy with a winning record in AC....ask Don shyster Trump

• PennsylvaniaSucks (109) posts 3:33 am

  todfiat- well while you are flirting with the sax player in the middle of the desert, in 115 degree weather, I'll stay behind and drinking at one of the beach bars, next to the ocean, with a cool shore breeze blowing on me. Vegas sucks.

• todfiat (0) posts 9:23 pm

  not only that, but you can stroll the sidewalks in Vegas with a drink in hand, with no hassles. You can hang out on Fremont Street with the sax player, free, and also carry drinks with you, just like on Bourbon Street, N.O. Regrettably, A.C. will never be shed of the projects in proximity to the casinos. Connect the dots.

• executioner1 (304) posts 7:50 pm

  Keep raping the public and sooner or later they walk away and don't come back. It costs $50 dollars with tolls and parking fees in A.C. and $400.00 for a room. Are they kidding for what? To gamble.Hell why come here when gaming is offered elsewhere? You can get a deal to fly to Vegas inclusive of room and slot and food coupons for $500.00. Oh yes you can actually walk outside there and feel safe.Here you can't walk after dark without being mugged on the main street.he city looks like crap so what happened to all of those parking fees to be used to beautify the city? Use those monies to hire an army to patrol and make the streets safe.

• Jamesy (80) posts 7:12 pm

  what is taking place in AC is Gods will...he gives and can take away...it's his way of payback for years and years of fraud greed corruption and unscroupulus conduct that has affected the lives of hundreds of thousands of people...millions in fact...doesn't matter what kind of capitalism?... casino's, banks, wall street, car manufacturers realitors, mortgage brokers, small business... they all will pay with Gods will if they conducted themselves in fraudulent corrupt ways. Greed is the ultimate demise! Sadly enough this is just the begining folks...AC was finished years ago but its slow death continues to reek of past greed and it's inability to make things right years ago....and now its too late!

• zebra2 (109) posts 5:29 pm

  Pennsylvania doe suck!!!

• BernieSchwartz (645) posts 5:26 pm

  You wait and see what Resorts and Hilton look like in 2 years, empty shells, graffitti, weeds, dead zones. This is not good for the City.

• PennsylvaniaSucks (109) posts 4:04 pm

  Ohhh yeah, sure, Nikynewark... I'm so sure that Chester, PA doesn't have its share of "skanks, junky's and crime", as you put it (cough cough). That city is almost as bad as Camden. Toll increases? The Delaware River Authority just recently increased their tolls to $4.00 for all the bridges, with talk of increasing it by another dollar next year. Here's an idea for you... how about getting a clue before you open your mouth so that you sound less stupid.

• todfiat (0) posts 3:50 pm

  Do Not Send To Know For Whom The Bell Tolls / It tolls for A.C.

• njbourne (72) posts 3:21 pm

  I agree with "PennsylvaniaSucks"...but keep Showboat too...all the others can get the wrecking ball

• zebra2 (109) posts 3:07 pm

  Just got back from a stay in AC. With the great airshow, beaches, boardwalk, dining, and yes some cash!!! I just can't see going to a casino sitting next to a jail!!!! (Chester)PA is nothing....

• Nikynewark (117) posts 2:15 pm

  Again, the economy is being used as an excuse. Smoke free Yonkers NY is doing half a billion a year in slot play. Smoke free Monticello NY has better slot play and is doing fine. I don't hear PA crying and CT slowed but still makes tons of money. Maybe it's the lousy slot play in AC, toll increase, parking charges, skanks, junky's and crime?

• todfiat- (93) posts 1:50 pm

  Things will get better with the economy, and this city in the near future. In 2010 there will be an end to this recession, once Obama's economic recovery programs have had a chance to help. Everyone wanted a quick fix to the problems Bush created, but it is a slow recovery. Once Langford is re-elected in November, and the economy improves, things will only get better in Atlantic City. Proud to be a Democrat!- todfat

• PennsylvaniaSucks (109) posts 1:48 pm

  Forgot to mention... Hilton refused to upgrade its property back when things were good. They insisted on being a gaming-only casino, instead of adding non-gaming amenities. Serves them right! Hilton would, however, be considered a 5-star property over in Pennsylvania though. haha

• PennsylvaniaSucks (109) posts 1:45 pm

  The only casinos worth keeping open are Borgata, Harrah's, Taj Majal, Tropicana, and soon-to-be Revel. Those are megaresorts, not just casinos. The rest of the places suck and deserve to close. That would boost the business at the more worthy casinos.

• MikeElbedewy (22) posts 1:25 pm

  May as well shut it down. Things are just getting worse. In the next 12 months PA and DE will go online with table games. Ohio and MD with slots. NY will follow sooner or later. As long as AC has the same lousy slots, VP and table games ( not to mention the tolls and parking fees its competitors DO NOT have) as its competitors AC is going to be left with the South Jersey market, period.

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