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There is little hope in the foreseeable future, the analysts say, that Revel will avoid defaulting on its massive debt - not with a key demographic group, affluent overnight customers from North Jersey and New York, now spending their disposable income on cleaning up from the storm.

"There is no doubt the probability of default has increased," Andrew Zarnett of Deutsche Bank AG said Wednesday. "There is no way to dispute that, given what has happened to Atlantic City the last two weeks."

Sandy's choke hold on business here persists nearly two weeks after most casinos reopened following a storm shutdown that lasted more than four days, even though the 12 gambling palaces sustained barely noticeable structural damage.

Revel had the most to lose in the shutdown. It opened only seven months earlier, is carrying the most debt, and is still trying to develop a clientele. The $2.4 billion mega-casino, built with more than $300 million in state credits and tax rebates, lost five days of business to Sandy, reopening at noon Nov. 3.

Getting customers back has been slow, as it has been for all the casinos. About half the resort's customers come from North Jersey and New York, which Sandy hit hard.

Revel's $850 million loan, which comes due in 2017, now is priced at about 52 cents on the dollar, a significant drop from where it traded in September and right before the hurricane as well. Analysts call that a clear sign that investors have lost confidence in Revel's ability to pay its debt and stay in business, though such pricing does not mean default is definite.

"Where the [loan] and bonds are trading indicates the market is quite concerned," said Robert Heller, managing director and head of gaming and leisure at UBS Securities L.L.C. Revel is "challenged because of the stress in Atlantic City compounded by the storm damage, which sets the city back even further."

A Monday report by Standard & Poor's said that although Revel had storm and business-interruption insurance to cover some of its Sandy-related revenue loss, "its term loan debt had already declined in the week leading up to the storm and is down nearly 25 points since the September revenue numbers were released."

Revel has failed to break the $20 million mark in monthly casino revenue since it opened April 2. Last month, with the Oct. 28 shutdown ordered by Gov. Christie, it made just $9.3 million, down from $16.9 million in September, ranking it 10th among casinos here.

It had finished in eighth place in May, June, July, August, and September. Last month, even the much smaller and older Atlantic Club and Resorts Casino eclipsed Revel, with Atlantic generating $9.9 million and Resorts $9.5 million.

On Wednesday, chief executive officer Kevin DeSanctis downplayed the possibility of a Revel default, standing behind his casino's high-end resort concept (10 swimming pools, a giant spa, an upscale mall, 14 celebrity-chef restaurants).

"While we continue to focus on helping our professionals who need help dealing with damage from Hurricane Sandy," DeSanctis said, "we expect that it will take some time for the region to recover and for our visitors from New Jersey and New York to be able to visit Revel.

"Most of the groups that canceled as a result of Hurricane Sandy have already rebooked," he said. "This is an important segment of our business, and we are focused on rebooking the remaining groups and driving new business in this area."

Revel's 1,400-room hotel was at more than 80 percent occupancy Saturday, and the casino will roll out top entertainment in the coming weeks, DeSanctis said.

But analysts say that may not be soon enough.

Said Zarnett: "We believe that the ramp-up of Revel was difficult enough when conditions were optimal, but with the storm and post-storm impact, it makes it that much harder for Revel to generate badly needed revenue and cash flow. If Revel is unable to generate positive cash flow over the winter months, liquidity will become a primary issue."

In August, Revel was approved by a consortium of banks for a doubling of its credit line to $100 million to pay for operating expenses through this year and 2013. But that was two months before Sandy hit.

"Longer term," Zarnett said, "we believe prolonged downside is likely as spend per visitor (and number of visitors) will be hampered by shrinking discretionary consumer budgets, as many consumers will now have less to spend on the casino. . . . Many will now be focused on expenses made towards repairing their property, and then Christmas."

Bob McDevitt, president of Unite Here Local 54, which represents about 14,500 casino and hotel workers at the Shore, said he still hoped to organize employees at Revel, the city's only fully nonunion casino. "We're organizing the workers there based on the assumption that there will be a change in management, and at some point in ownership," McDevitt said.

Revel is "unsuccessful because it is the wrong concept at the absolute wrong time," he said.

 

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