Icahn Doesn’t Own The Tropicana Yet..

Andrew Calvo | April 30, 2009 | 0 Comments

I’m sure everyone has read about and heard the news about the Tropicana Atlantic City filing for bankruptcy yesterday, but what a lot of people don’t understand is Carl Icahn doesn’t own it yet!

I touched on this in my last article about the Tropicana, but I thought it was worth mentioning again because unless you read closely, every newspaper article makes it sound like Icahn automatically gets the property once it reaches auction in bankruptcy court – that’s not the case.

Carl Icahn does have a contract with the overseer of the property to purchase the property, but its pending the auction and if he is the highest bidder which will determine its next owner. Currently Icahn is the highest bidder – but remember.. The auction hasn’t even started yet.

Icahn’s bid doesn’t seem to include any actual cash – its simply a reallocation of the existing bonds he owns, being put toward the purchase price. If someone does come in with a higher bid – Icahn also has the potential to put up cash, or use more of the Tropicana’s bonds which he supposedly owns over $1 billion worth.

The only other bidder who still has publicly voiced his interest in the Tropicana property is the Cordish Companies. David Cordish originally was willing to bid $750 million through a combination of cash and financing for the property, or $525 million all in cash – but apparently a combination of cold feet and the continual declining of the real estate market put that bid on hold. It’s very possible that he may come to the table during the auction.

While I’m no expert in bankruptcy auctions – and especially complex auctions such as this one, it does seem as though Columbia Sussex (the former owner of the Tropicana) will lose their entire investment in the property. When the property was first put on the market in late 2007 it wasn’t intended to go into bankruptcy court, but due to the recession and the bidders placing low bids or dropping out – bankruptcy’s hand was forced.

Its still unclear what Icahn will do with the property if he ends up being the winning bidder; in the past he has simply flipped the property for a higher price down the road (eg: the Sands in AC to Pinnacle Entertainment). Although Icahn’s continual interest in MGM Mirage, where he’s essentially doing the same thing with MGM as he is with the Tropicana – but on a larger scale – may signal other plans.

[email protected]