Mediation to solve the ongoing fight over powering the closed Revel casino in Atlantic City began last week in federal court, but no agreements were announced.
Florida-developer Glen Straub bought the closed casino last month, but has balked at paying the owner of the property’s power plant—ACR Energy—for back power bills and for the debt on the plant’s construction.
ACR Energy shut off the power to the building two days after Straub took ownership, but it has been restored under a temporary arrangement after the building sat in the dark for three weeks.,
ACR used $118.6 million in municipal bonds to borrow money and build the power plant called the Inlet District Energy Center and adjacent to Revel. Though the bonds were issued by the New Jersey Economic Development Authority, ACR Energy Partners is required to repay bondholders with 10.5 percent to 12 percent interest.
ACR also spent $40 million of its own money to build the plant.
The former owners of the casino agreed to repay that money with 15 to 18 percent interest. In its 20-year energy contract with Revel, ACR required Revel to pay monthly fees to cover both the debt and equity investments.
Revel was seen to be saddled with a $1.5 million monthly payment under the deal, which is pointed to as a major factor for its bankruptcy. The terms of the deal apparently sacred off several potential buyers for the property before Straub eventually bought it.
He has refused to pay ACR and has talked of finding an alternative power source for the property. Meanwhile, ACR’s bondholders haven’t been paid since the property went into bankruptcy in June.
In a related matter, bankruptcy Judge Gloria Burns denied a request from ACR to delay the release of its Chapter 11 disclosure statement.
The purpose of the disclosure statement is to provide creditors with information about the company and allow them to make an informed decision about its reorganization plan.
Meanwhile, ACR has also objected to the distribution plan for the Revel sale proceeds. Under the agreement, Wells Fargo, Revel’s bankruptcy lender, gets most of the $82 million sale price. Revel’s unsecured creditors get $1.75 million; $13.5 million is set aside for legal fees and other administrative fees for services already provided in Revel’s Chapter 11 case; and $7 million funds professional fees to wrap up Revel’s bankruptcy.
