According to the U.S. Bankruptcy Court docket, ACR Energy Partners filed a motion to convert Revel AC’s Chapter 11 reorganization proceeding to a liquidation under Chapter 7. The motion explains, “In the days following the commencement of the Revel Casino’s second bankruptcy in just as many years, the Debtors announced a bold and aggressive strategy to move forward. While continuing to operate the hotel and casino, which employed approximately 4,000 people, the Debtors quickly moved forward to sell their assets and to obtain secured post-petition financing (the ‘DIP Loan’) from their existing lenders (‘DIP Lender’) to fund a ‘quick’ sale process. Now, less than nine months later, the Debtors’ lofty goals have largely failed, as they are now seeking to accept a sale price reflecting a reduction of more than 35% of the price previously approved the Court. The Debtors’ sale efforts, which had failed for six months prior to the Petition Date and have now included two additional failed sales processes within the past two months, are merely the latest, but not least, troubling development in these cases. In fact, the Debtors’ stewardship has saddled the estates with tens of millions of dollars of wholly unnecessary costs and a DIP Loan that guarantees that tens of millions of dollars of legitimate claims, including those of ACR Energy, will go unpaid.”
The conversion motion continues, “Yet, the Debtors have continued to advance the interests of the DIP Lender to the detriment of the estates’ creditors, pushing toward a sale of the Debtors’ assets through a hopelessly flawed purchase agreement, on an expedited timeline, a final hearing on the DIP Loan and a purported settlement (the ‘Settlement’) of claims between the Debtors, the DIP Lender, and the Official Committee of Unsecured Creditors (the ‘Committee’), which, at a minimum, demonstrates a gross breach of the Debtors’ fiduciary obligations. The net effect of all of these steps taken together is that the DIP Lender will guarantee itself all proceeds of an eventual sale of the Debtors’ assets without paying in full the costs of the administration of these cases, including the expenses that are within the purview of section 506(c) of the Bankruptcy Code, and with no further contribution, save for a pittance thrown at unsecured creditors, who will in reality see nothing. On the other hand, the sale and compromises will leave the estates wholly insolvent and administrative creditors, such as ACR Energy, with nothing. To make matters even worse, not only will ACR Energy lose over $20 million post-petition on top of the $12 million pre-petition, but it has been coerced into providing financing to these estates, and is now being subject to the handcuffs inserted into the latest version of an oppressive purchase agreement. In this dire situation, the Debtors have forfeited their right to continue as debtors-in possession, and the appointment of a chapter 7 trustee is both appropriate and warranted.”
Read more about REVE’s Chapter 11 filing.