Docstoc

IN THE UNITED STATES BANKRUPTCY COURT

Document Sample
IN THE UNITED STATES BANKRUPTCY COURT Powered By Docstoc
					                                                                              HIGHLY CONFIDENTIAL
                                                                                       DO NOT FILE




                     IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

                                                          )
In re:                                                    )    Chapter 11
                                                          )
TROPICANA ENTERTAINMENT, LLC, et al.,1                    )    Case No. _____ (___)
                                                          )
                               Debtors.                   )    Joint Administration Requested
                                                          )

              DECLARATION OF SCOTT C. BUTERA IN SUPPORT OF
         THE DEBTORS’ CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS

         I, Scott C. Butera, hereby declare under penalty of perjury:

         1.     I am the President of Tropicana Entertainment, LLC, a Delaware corporation and

one of the above-captioned debtors and debtors in possession (collectively, the “Debtors”). In

this capacity, I am familiar with the day-to-day operations, business, and financial affairs of the

Debtors. I was hired by Tropicana Entertainment, LLC to oversee its restructuring efforts and

have been employed by the company since March 19, 2008.

1   The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor’s
    federal tax identification number, are: Adamar Garage Corporation (1225); Adamar of
    Nevada (4178); Argosy of Louisiana, Inc. (5121); Atlantic-Deauville, Inc. (2629); Aztar
    Corporation (6534); Aztar Development Corporation (0834); Aztar Indiana Gaming
    Company, LLC (5060); Aztar Indiana Gaming Corporation (1802); Aztar Missouri Gaming
    Corporation (8819); Aztar Riverboat Holding Company, LLC (5055); Catfish Queen
    Partnership In Commendam (4791); Centroplex Centre Convention Hotel, L.L.C. (2613);
    Columbia Properties Laughlin, LLC (9651); Columbia Properties Tahoe, LLC (1611);
    Columbia Properties Vicksburg, LLC (0199); CP Baton Rouge Casino, L.L.C. (9608); CP
    Laughlin Realty, LLC (9621); Hotel Ramada of Nevada (8259); Jazz Enterprises, Inc.(4771);
    JMBS Casino LLC (6282); Ramada New Jersey Holdings Corporation (4055); Ramada New
    Jersey, Inc. (5687); St. Louis Riverboat Entertainment, Inc. (3514); Tahoe Horizon, LLC
    (9418); Tropicana Development Company, LLC (0943); Tropicana Enterprises (7924);
    Tropicana Entertainment Holdings, LLC (9131); Tropicana Entertainment Intermediate
    Holdings, LLC (9214); Tropicana Entertainment, LLC (9263); Tropicana Express, Inc.
    (0806); Tropicana Finance Corp. (4040); Tropicana Las Vegas Holdings, LLC (9332);
    Tropicana Las Vegas Resort and Casino, LLC (9355); and Tropicana Real Estate Company,
    LLC (1107). The location of the Debtors’ corporate headquarters and the service address for
    all Debtors is: 740 Centre View Boulevard, Crestview Hills, Kentucky 41017.
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


            2.           Prior to joining Tropicana Entertainment, LLC, I served as the Chief Operating

Officer of the Cosmopolitan Resort and Casino in Las Vegas, Nevada since January 2007. Prior

to that, I was the President, Chief Operating Officer and Executive Vice President of Trump

Hotels & Casino Resorts, Inc., where I led the effort to restructure that company out of

bankruptcy. For the fifteen years before joining Trump Hotels & Casino Resorts, Inc., I was an

investment banker at a number of leading investment banks, focusing on the gaming, lodging,

and leisure industries.

            3.           Concurrently with the filing of this declaration (the “Declaration”), each Debtor

has filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code, 11

U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in this Court (the “Chapter 11 Cases”). To enable

the Debtors to operate effectively and avoid certain adverse effects of operating in chapter 11,

the Debtors have also filed several motions and applications requesting various types of

immediate relief (collectively, the “First Day Motions”). The Debtors believe that the relief they

seek in the First Day Motions is critical to stabilizing their businesses and ensuring a smooth

transition into chapter 11, preserving value, and facilitating a successful reorganization. The

Debtors respectfully request that the Court grant the relief requested in the First Day Motions.

            4.           I am authorized by the Debtors to submit this Declaration in support of the

Debtors’ petitions for relief under the Bankruptcy Code and the First Day Motions. Except as

otherwise indicated, all facts set forth in this Declaration are based upon:                 my personal

knowledge; information supplied or verified by personnel in departments within the various

divisions of the Debtors including, legal, sales, marketing, human resources, finance, and

accounting; information supplied by the Debtors’ third-party advisors, including Kirkland &

Ellis LLP, Lazard Frères & Co. LLC, and AlixPartners, LLC; my review of relevant documents;



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

2
                                                                                       HIGHLY CONFIDENTIAL
                                                                                                DO NOT FILE


or my opinion based upon my experience and knowledge of the Debtors’ operations and

financial condition. If I were called upon to testify, I would testify competently to the facts set

forth herein.

            5.           Part I of this Declaration describes the Debtors’ businesses and the circumstances

leading to the Debtors’ commencement of the Chapter 11 Cases. Part II summarizes the First

Day Motions. Capitalized terms not otherwise defined herein shall have those meanings ascribed

to them in the relevant First Day Motions.

                                             I.      BACKGROUND

A.          The Debtors’ Businesses

            6.           The Debtors and their non-Debtor affiliates in the casino business comprise one of

the largest and most diversified privately-held casino gaming entertainment providers in the

United States. They are a leading domestic casino operator, with approximately 540,000 square

feet of gaming space and more than 8,300 hotel rooms, and employ more than 11,000 full- and

part-time individuals. The Debtors and these non-Debtor affiliates currently own, operate, or

have interests in thirteen casino facilities in nine distinct gaming markets, with six casinos in

Nevada, three casinos in Mississippi, two casinos in Louisiana, one casino in New Jersey, and

one casino in Indiana.2

            7.           These casinos and resorts provide customers with a high-quality casino

entertainment and hospitality experience through a comfortable gaming environment, a variety of

hotel amenities, casual and fine dining choices, and non-gaming entertainment options.

            8.           Their casino and resort facilities are in many of the largest casino markets in the

United States, including in Las Vegas and Atlantic City. The Tropicana Resort and Casino Las


2     These statistics include the Tropicana Atlantic City, which is defined and described herein.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

3
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


Vegas (the “Tropicana Las Vegas”), owned by the Debtor-subsidiaries of Debtor Tropicana Las

Vegas Holdings, LLC, is located on 34-acres of real estate on the “Strip” in Las Vegas, Nevada.

Together with the MGM Grand, the Excalibur, the Luxor, the Monte Carlo, and the New York-

New York, the Tropicana Las Vegas is located at the prime intersection known as the “Four

Corners,” which collectively offers approximately 18,000 hotel rooms.

            9.           The Tropicana Resort and Casino Atlantic City (the “Tropicana Atlantic City”) is

situated along the Atlantic City Boardwalk. The Tropicana Atlantic City, one of the largest

casinos in Atlantic City, features more than 2,000 hotel rooms in three hotel towers, a casino

occupying almost 150,000 square feet, a 200,000 square foot dining, entertainment, and retail

center called “The Quarter,” meeting, convention and banquet space, parking facilities, and many

other amenities. As discussed below, a conservator/trustee appointed by the New Jersey Casino

Control Commission currently operates and controls a substantial portion of the assets of The

Tropicana Atlantic City with the Debtors having a beneficial interest therein, and the Debtors

own and control the remaining assets of the Tropicana Atlantic City (as described herein).

            10.          For the fiscal year ended December 31, 2007, the Debtors and their non-Debtor

affiliates in the casino business generated approximately $1.0 billion in revenues.                As of

December 31, 2007, the Debtors and these non-Debtor affiliates had assets totaling

approximately $2.8 billion (book value) and liabilities totaling approximately $3.3 billion (book

value).

            (i)          Corporate History of Tropicana

            11.          Tropicana traces its roots to 1990, when William J. Yung III (the ultimate equity

holder of the Debtors and certain non-Debtor affiliates), building off his long record of success in

the hotel and hospitality industry, founded Wimar Tahoe Corporation and its affiliates



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

4
                                                                                   HIGHLY CONFIDENTIAL
                                                                                            DO NOT FILE


(collectively, “Wimar”) to begin purchasing, developing, and operating casinos. Through 2006,

Wimar acquired a number of casinos and resorts, including:

                  The Lake Tahoe Horizon Casino and Resort is located in South Lake Tahoe in
                   Stateline, Nevada and is owned (subject to a ground lease) by Debtor Tahoe Horizon,
                   LLC.

                  The MontBleu Resort Casino and Spa is located immediately adjacent to the Lake
                   Tahoe Horizon Casino and Resort and is owned (subject to a ground and facility
                   lease) by Debtor Columbia Properties Tahoe, LLC.

                  The Lighthouse Point Casino is a riverboat located in Greenville, Mississippi and is
                   owned by non-Debtor affiliate Greenville Riverboat, LLC, in which Debtor Tropicana
                   Entertainment, LLC has a 79% voting interest and an 84% economic interest.

                  The Bayou Caddy’s Jubilee Casino is a riverboat casino located in Greenville,
                   Mississippi and is owned by Debtor JMBS Casino, LLC.

                  The River Palms Hotel and Casino is located in Laughlin, Nevada, and is owned by
                   Debtor Columbia Properties Laughlin, LLC. The real estate on which the casino is
                   located is owned by Debtor CP Laughlin Realty, LLC.

                  The Vicksburg Horizon Casino is a riverboat located in downtown Vicksburg,
                   Mississippi and is owned by Debtor Columbia Properties Vicksburg, LLC. On
                   November 13, 2007, the Debtors entered into an agreement to sell the Vicksburg
                   Horizon Casino to Nevada Gold for $35 million in cash that has yet to be
                   consummated. The proposed sale is pending.

                  The Belle of Baton Rouge is a riverboat is located on the Mississippi River in
                   downtown Baton Rouge, Louisiana and is owned by Debtor CP Baton Rouge Casino,
                   LLC and its Debtor-subsidiaries.

            (ii)         The Aztar Acquisition

            12.          After demonstrating success in the gaming industry, in 2006 Wimar sought to

further expand its gaming and hospitality business. On May 19, 2006, Wimar entered into an

agreement to purchase Aztar Corporation, a holding company owning five casino properties,

including one in Missouri that the Debtors previously sold. On January 3, 2007, Wimar Tahoe

Corporation acquired all of the stock of the then publicly-traded Aztar Corporation for

approximately $2.1 billion in cash (the “Aztar Acquisition”), and then merged Aztar Corporation


ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

5
                                                                                       HIGHLY CONFIDENTIAL
                                                                                                DO NOT FILE


into one of Wimar Tahoe Corporation’s subsidiaries. The Aztar Acquisition was the result of an

intensely competitive bidding process, with a purchase price that, in retrospect, represents the

height of the real estate market and was consummated just prior to that market’s precipitous

decline.

            13.          Subsequent to the merger, Wimar Tahoe Corporation changed its name to

Tropicana Casinos and Resorts, Inc. (“TCR”). With the Aztar Acquisition, non-Debtor TCR

added to its gaming business the Tropicana Las Vegas and The Tropicana Atlantic City. In

addition, the Aztar Acquisition also included the Casino Aztar Evansville riverboat located in

Evansville, Indiana (the “Tropicana Evansville”), which is owned by Debtor Aztar Riverboat

Holding Company, LLC, plus the Tropicana Express Hotel and Casino in Laughlin, Nevada,

which is owned by Debtor Tropicana Express, Inc.

            (iii)        Non-Debtor Related Parties

            14.          In addition to his ownership interests in the Debtors, Mr. Yung is also the founder

and majority owner of Columbia Sussex Corporation (with its direct and indirect subsidiaries,

collectively “Columbia Sussex”). Columbia Sussex, founded in 1972, has grown to become one

of the country’s largest privately held hospitality owners, developers, and operators of hotel

properties, with approximately $1 billion in revenues in 2007. Columbia Sussex owns and

operates approximately 70 hotel properties across the United States, Canada, and the Caribbean,

with approximately 24,000 rooms and approximately 11,000 employees. Columbia Sussex’s

mostly upscale, full service hotels are marketed under some of the best-known brands in the

hospitality industry, including Hilton, Westin, Sheraton, Renaissance, Wyndham, Doubletree,

and Marriott.

            15.          To achieve operational efficiency, and to the extent permitted by each applicable

jurisdictions’ gaming regulations, the Debtors share certain administrative and business functions

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

6
                                                                                    HIGHLY CONFIDENTIAL
                                                                                             DO NOT FILE


with Columbia Sussex, including human resources, construction and development, purchasing,

marketing, accounting, administration, risk management, legal, and treasury functions (as well as

a corporate office). For the most part, the services are performed by Columbia Sussex pursuant

to a number of operating and service agreements.

B.          The Debtors’ Prepetition Indebtedness

            16.          The Debtors financed the Aztar Acquisition, in part, through the “OpCo” secured

credit facility, the “LandCo” secured credit facility, and the issuance of a series of unsecured

notes. The Debtors also used proceeds of the “OpCo” and “LandCo” facilities to refinance

certain existing indebtedness.

            (i)          Senior Secured “OpCo Credit Facility”

            17.          The largest component of the Aztar Acquisition financing was an approximately

$1.71 billion secured credit facility (the “OpCo Credit Facility”) was memorialized in that

certain credit agreement dated as of January 3, 2007 (as amended, the “OpCo Credit

Agreement”).3


3     The OpCo Credit Agreement is by and among Debtor Tropicana Entertainment, LLC, as
      borrower, and certain other Debtors, as guarantors, Credit Suisse, as collateral agent and
      administrative agent, Credit Suisse Securities (USA) LLC as sole bookrunner and sole lead
      arranger, Barclays Bank PLC and Société Générale, as co-lead arrangers and co-syndication
      agents, and The Royal Bank of Scotland, PLC and ING Capital LLC, as co-documentation
      agents (collectively, the “OpCo Loan Parties”). The OpCo Credit Facility is guaranteed by
      the following Debtors: Adamar Garage Corporation; Adamar of New Jersey, Inc.; Argosy of
      Louisiana, Inc.; Atlantic-Deauville Inc.; Aztar Corporation; Aztar Development Corporation;
      Aztar Indiana Gaming Company, LLC; Aztar Indiana Gaming Corporation; Aztar Missouri
      Gaming Corporation; Aztar Riverboat Holding Company, LLC; Catfish Queen Partnership in
      Commendam; Centroplex Centre Convention Hotel, LLC; Columbia Properties Laughlin,
      LLC; Columbia Properties Tahoe, LLC; Columbia Properties Vicksburg, LLC; CP Baton
      Rouge Casino, LLC; CP Laughlin Realty, LLC; Jazz Enterprises, Inc.; JMBS Casino, LLC;
      Ramada New Jersey Holdings Corporation; Ramada New Jersey, Inc.; Manchester Mall,
      Inc.; St. Louis Riverboat Entertainment, Inc.; Tahoe Horizon, LLC; Tropicana Entertainment
      Intermediate Holdings, LLC; and Tropicana Express, Inc. (collectively, the “OpCo
      Guarantors”).

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

7
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


            18.          The OpCo Credit Facility includes a $1.53 billion term loan facility (the “OpCo

Term Facility”) and, after the effect of the OpCo Forbearance Agreement (as defined below), a

$90.0 million revolving loan facility, which was originally $180.0 million (the “OpCo Revolving

Facility”). The OpCo Revolving Facility has a swingline sub-facility available for short-term

borrowings and a letter of credit sub-facility available for the issuance of letters of credit. As of

April 30, 2008, approximately $1.3 billion of the principal amount was outstanding under the

OpCo Term Facility, and approximately $21 million of the principal amount was outstanding

under the OpCo Revolving Facility.

            19.          The Debtors’ obligations under the OpCo Credit Facility are secured by a

perfected first-priority security interest in substantially all of the assets of Tropicana

Entertainment, LLC and the OpCo Guarantors. In addition, Debtor Aztar Corporation’s equity

interest in Debtor Tropicana Las Vegas Holdings, LLC has been pledged to secure the OpCo

Credit Facility; this pledge effectively gives the OpCo Credit Facility lenders the economic

equivalent of a second lien on the Tropicana Las Vegas assets.

            (ii)         Senior Secured “LandCo Credit Facility”

            20.          The Debtors also financed the Aztar Acquisition by entering into a $440.0 million

secured credit facility (the “LandCo Credit Facility”) pursuant to a credit agreement dated as of

January 3, 2007 (as amended, the “LandCo Credit Agreement”).4 As of April 29, 2008, $440.0

million of the principal amount was outstanding under the LandCo Credit Facility.


4     The LandCo Credit Agreement is by and among Debtor Tropicana Las Vegas Resort and
      Casino, LLC, as borrower and certain other Debtors, as guarantors, and Credit Suisse,
      Cayman Islands Branch, as sole administrative agent and collateral agent (collectively, the
      “LandCo Loan Parties”). The LandCo Credit Facility is also guaranteed by the following
      Debtors: Adamar of Nevada Corporation; Hotel Ramada of Nevada Corporation; Tropicana
      Development Company, LLC; Tropicana Enterprise Partnership; Tropicana Real Estate Co.,
      LLC; and Tropicana Las Vegas Holdings, LLC (collectively the “LandCo Guarantors”).

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

8
                                                                                 HIGHLY CONFIDENTIAL
                                                                                          DO NOT FILE


            21.          The Debtors’ obligations under the LandCo Credit Facility are secured by a

perfected first-priority security interest in substantially all of the assets of Tropicana Las Vegas

Resort and Casino, LLC and the LandCo Guarantors.                    In addition, Debtor Tropicana

Entertainment Holdings, LLC has provided a first-priority pledge of its equity interest in

Tropicana Entertainment Intermediate Holdings, LLC to the LandCo Credit Facility lenders.

            (iii)        Prepetition Senior Subordinated “Unsecured Notes”

            22.          Finally, the Debtors financed the Aztar Acquisition through the issuance of

$960 million of 9-5/8% Senior Subordinated Notes due 2014 (the “Unsecured Notes”) pursuant

to an indenture dated as of December 28, 2006, by and among Debtors Tropicana Entertainment,

LLC and Tropicana Finance Corporation, as issuers, and certain other Debtors, as guarantors,

and U.S. Bank National Association, as trustee (the “Indenture Trustee”) (as amended, the

“Indenture”).5 The Debtors’ obligations with respect to the Unsecured Notes are subordinate to

their obligations under the OpCo Credit Agreement.6




5     The Unsecured Notes are guaranteed by the following entities: Adamar Garage Corporation;
      Adamar of New Jersey, Inc.; Argosy of Louisiana, Inc.; Atlantic-Deauville Inc.; Aztar
      Corporation; Aztar Development Corporation; Aztar Indiana Gaming Company, LLC; Aztar
      Indiana Gaming Corporation; Aztar Missouri Gaming Corporation; Aztar Riverboat Holding
      Company, LLC; Catfish Queen Partnership in Commendam; Centroplex Centre Convention
      Hotel, LLC; Columbia Properties Laughlin, LLC; Columbia Properties Tahoe, LLC;
      Columbia Properties Vicksburg, LLC; CP Baton Rouge Casino, LLC; CP Laughlin Realty,
      LLC; Jazz Enterprises, Inc.; JMBS Casino, LLC; Ramada New Jersey Holdings Corporation;
      Ramada New Jersey, Inc.; Manchester Mall, Inc.; St. Louis Riverboat Entertainment, Inc.;
      Tahoe Horizon, LLC; Tropicana Entertainment Intermediate Holdings, LLC; and Tropicana
      Express, Inc. (collectively, the “Unsecured Notes Guarantors”).
6     On November 21, 2007, Debtors Tropicana Entertainment, LLC and Tropicana Finance
      Corporation, as issuers of the Unsecured Notes, completed an exchange offer pursuant to
      which the outstanding Unsecured Notes (that were unregistered) were exchanged for an equal
      principal amount of 9-5/8% Senior Subordinated Notes due 2014 that were registered under
      the Securities Act of 1933.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

9
                                                                                       HIGHLY CONFIDENTIAL
                                                                                                DO NOT FILE


C.          Change in Market Conditions After the Aztar Acquisition

            23.          As a result of the Aztar Acquisition financing, the Debtors became significantly

but not inordinately leveraged, which would have been quite manageable had market forces not

quickly changed. But almost immediately after the Aztar Acquisition closed, the Debtors were

challenged with a downturn in the economy that impacted the Debtors’ operations in three

principal respects. First, as consumers experienced the downturn in the economy, they cut back

on their traveling and gambling, which caused a material and unprecedented drop in the Debtors’

revenue (as well as those of many of the Debtors competitors in the gaming industry). For

example, according to the New Jersey Casino Control Commission, in 2007 Atlantic City

casinos reported a year over year 9.6% decline in gross operating profits (a widely accepted

measure of profitability in the gaming industry), a 4.8% decline in net revenues during the same

period, and a decrease in net income from approximately $364 million in 2006 to a net loss of

approximately $60 million in 2007.7 One local publication in Atlantic City put the decline in

context when it reported:                  “Overall revenue suffered the first annual decline since casino

gambling began in Atlantic City in 1978.”8 Second, the value of real estate—the Debtors’

primary assets—eroded across the country, sharply reducing the market value of the Debtors’

total assets. Third, as has been well-publicized, the nation’s credit markets drastically tightened,

severely limiting the Debtors’ access to additional capital—especially given that the Debtors’

collateral package is largely based on real estate—as well as severely limiting the Debtors’




7     Press Release, New Jersey Casino Control Commission, CCC Announces 2007 Results (Apr.
      2, 2008), available at http://www.state.nj.us/casinos/home/news/ pdf/2008/4thqu2007.pdf.
8     Casinos Dealt Another Bad Hand, South Jersey News Online, Apr. 2, 2008, available at
      http://www.nj.com/southjersey/index.ssf/2008/04/casinos_dealt_another_bad_hand.html.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

10
                                                                                   HIGHLY CONFIDENTIAL
                                                                                            DO NOT FILE


lenders’ willingness to refinance if needed. This affected all aspects of casino financings,

including in Las Vegas and Atlantic City as reported:

                  According to Deutsche Bank analyst Andrew Zarnett, “‘The credit crisis has now
                   affected Atlantic City. These large projects are going to have a hard time on a
                   temporary basis getting financed.”9

                  “Debt for any large construction project is largely unavailable, and even for what is
                   available, the cost of construction financing right now is so high that it makes it
                   difficult for an investor to obtain the returns to justify the equity investment.”10

            24.          With the declining gaming and hotel revenues experienced by the Debtors, their

debt levels compared with decreased revenues made their leverage go from bad to worse. Thus,

with significant indebtedness resulting from the Aztar Acquisition, combined with declining

gaming revenue, declining real estate values, and a tight credit market, the Debtors had very little

margin for error and could not afford any significant setbacks during this tenuous period.

Unfortunately, in December, 2007, the Debtors suffered such a setback when their New Jersey

gaming license was not renewed.

D.          The Tropicana Atlantic City

            25.          As previously discussed, one of the Debtors’ most important assets acquired in

the Aztar Acquisition was the Tropicana Atlantic City. However, as with any casino, the

Debtors had to complete a lengthy licensing process to have uninhibited rights to own and

operate the Tropicana Atlantic City on a permanent basis.




9     Judy DeHaven, Boom May Bust: Credit Crisis Threatens Casino Plans in A.C., The Star-
      Ledger, Feb. 27, 2008, at p. 21.
10    Jennifer S. Forsyth, Foreclosure on Las Vegas Casino to Begin, The Wall Street Journal,
      Mar. 15, 2008, at p. B6.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

11
                                                                                     HIGHLY CONFIDENTIAL
                                                                                              DO NOT FILE


            (i)          The New Jersey Casino License Process

            26.          The New Jersey casino regulatory process focuses on the casino licensee. The

qualifications of license applicants are vetted by the New Jersey Casino Control Commission

(the “New Jersey Commission”) under the New Jersey Casino Control Act. The New Jersey

Casino Control Act requires casino licensees to establish their qualifications under broad criteria

without any prescribed standards required of casinos to satisfy such criteria.

            27.          The New Jersey Casino Control Act also requires the qualification of individuals

and entities that control the casino licensee through holding or intermediary companies. Where,

as occurred here, a new owner contracts to obtain a significant ownership interest in an existing

casino licensee, the New Jersey Casino Control Act requires the prospective owner to apply for

and obtain first temporary approval known as Interim Casino Authorization, then “plenary”

qualification as a holding or intermediary company of the casino licensee. Thus, before TCR

(then known as Wimer Tahoe Corporation) could close on the Aztar Acquisition, it was required

to place its future equity interests in of Adamar of New Jersey, Inc. (“Adamar”) into a trust (the

“New Jersey Trust”), which trust was to be administered by former State Supreme Court Justice,

Gary S. Stein, Trustee. On October 16, 2006, TCR executed the requisite trust agreement and

placed the stock representing all of its future right, title, and interest in Adamar into the New

Jersey Trust. On November 2, 2006, the New Jersey Commission granted Interim Casino

Authorization and approved TCR’s acquisition of Adamar, pending its plenary qualification,

which could occur only after a thorough investigation by the regulatory arm of the New Jersey

Attorney General, The Department of Law and Public Safety, Division of Gaming Enforcement

and evaluation of its qualifications to the same standards as casino licensees. When the Aztar

Acquisition occurred on January 3, 2007, TCR took control of Adamar, while its stock in

Adamar remained in the control of Justice Stein as Trustee.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

12
                                                                                  HIGHLY CONFIDENTIAL
                                                                                           DO NOT FILE


            28.          Pursuant to this arrangement, the Debtors had the right to direct and indeed

directed all day-to-day operations and management of the casino while their application was

pending. According to New Jersey law, if the plenary qualification were granted, the New Jersey

Trust would dissolve and all right, title, and interest in the casino would be held by the applicant.

If the plenary qualification were denied, the New Jersey Trust would “spring into operation” and

the Debtors would lose significant rights to control, operate, and profit from the Tropicana

Atlantic City. If this were to occur, the role of the trustee would become substantive, and the

trustee would be charged with managing the casino business on an interim basis while he

marketed and sold the casino assets within a statutory timeframe.

            29.          Additionally, Adamar’s casino license, which it held since 1981, was most

recently renewed in November 2003 for a four-year period to expire November 2007. In June

2006, Adamar applied to renew its casino license, requesting an extension for a five-year term.11

Because the Attorney General had completed its investigation into TCR’s qualifications as a

holding company, the New Jersey Commission determined to hear both the renewal and the

plenary qualification issues in a single proceeding beginning on November 20, 2007.

            30.          In 2007, the Debtors began to operate the Tropicana Atlantic City in an

increasingly challenging revenue environment as they worked with the New Jersey gaming

authorities toward satisfying the requirements for the license and qualification. In operating the

Tropicana Atlantic City, the Debtors applied many of the same business strategies that had

historically marked their prior business successes.           For example, during 2007 the Debtors

invested approximately $30 million into the Tropicana Atlantic City as capital expenditures. At

the same time, the Debtors conducted a holistic review of hotel and casino expenses and, like

11    The New Jersey Casino Control Act allows for renewal of casino licenses for terms of
      between one and five years at the discretion of the New Jersey Commission.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

13
                                                                                        HIGHLY CONFIDENTIAL
                                                                                                 DO NOT FILE


their competition, made the very tough but necessary decision to reduce the size of their

workforce at the hotel. Understandably, those employees who lost their jobs were disappointed

with the workforce reduction necessitated by market realities. Immediately, however, the union

representing the Tropicana Atlantic City hotel workers engaged in a very public, political, and

vociferous campaign to undermine the Debtors and their management during the final stages of

the license qualification and renewal process.

            (ii)         Results of the New Jersey License Removal and Plenary Qualification
                         Process

            31.          After completing its investigation, issuing a series of reports, and considering the

evidence produced at the hearing held by the New Jersey Commission, the Attorney General’s

office recommended that Adamar receive a one-year license renewal, subject to certain

conditions, and the applicants agreed to virtually all of these conditions (including a fine in the

amount of $100,000 to settle any regulatory violations.)

            32.          However, notwithstanding the Attorney General’s recommendation and all of the

Debtors’ efforts throughout 2007 to improve the Tropicana Atlantic City and (including efforts

in conjunction with the New Jersey gaming authorities), on December 12, 2007, the New Jersey

Commission rejected the Attorney General’s recommendation and denied both applications.

            33.          The New Jersey Commission’s decision was unprecedented in many respects and,

the Debtors respectfully assert, was wrong. The Debtors appealed the New Jersey Commission’s

ruling on December 13, 2007, to the Appellate Division of the Superior Court of New Jersey,

and this appeal is pending. On appeal, the Debtors assert that the New Jersey Commission’s

order denying license renewal, a result advocated only by the union representing certain

employees of the Tropicana Atlantic City, must be reversed because it is based primarily upon

the New Jersey Commission’s misinterpretation of one of its own regulations, as well as the New


ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

14
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


Jersey Commission’s consideration of matters outside of its regulatory authority, such as the

Debtors’ prudent business decisions regarding the staffing of non-mandatory, hotel positions.

The Debtors also appeal on the grounds that the New Jersey Commission’s findings concerning

the business ability and integrity of the Debtors’ officers and directors are arbitrary and

capricious, in that they are not supported by, and in fact are contradicted by, the evidence

presented during the hearing. The New Jersey appellate court is scheduled to hear oral argument

on May 13, 2008. The Debtors believe that the ruling by the New Jersey Commission should be

overturned and are hopeful that the Debtors will be issued a casino license to operate the

Tropicana Atlantic City in the near future.

E.          Impact of the New Jersey Commission’s Decision

            34.          Despite the Debtors’ appeal, the New Jersey Commission’s decision has triggered

a series of cascading events that led directly to the filing of the Chapter 11 Cases. Among other

things: the Debtors lost control over the Tropicana Atlantic City (and its revenue), which is now

subject to forced sale proceedings; the Debtors had to cede some control over the Tropicana

Evansville and engage in a forced sale process; and the Debtors defaulted under their various

debt obligations.

            (i)          Loss of Control of the Tropicana Atlantic City

            35.          As a direct consequence of the denial of the application for plenary qualification

of TCR as a holding company, the New Jersey Trust became “operative” or “sprung” into

existence, and Justice Stein became immediately authorized and directed to sell the Trust’s assets

(i.e., the equity interests in non-Debtor Adamar of New Jersey, Inc., which holds title to the

Tropicana Atlantic City assets) within 120 days and, in the interim, assume the management and

control of the hotel and casino operations. (The 120-day sale deadline has been extended to



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

15
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


June 9, 2008). Justice Stein, however, cannot close on any such sale until the Debtors’ appeal

runs its course.

            36.          Moreover, as a consequence of the denial of the renewal application, on

December 19, 2007, the New Jersey Commission also appointed Justice Stein as “conservator”

of the Tropicana Atlantic City assets. Thus, Justice Stein now “wears two hats.” As trustee of

the New Jersey Trust, he controls the stock of non-Debtor Adamar of New Jersey, Inc., which

owns the Tropicana Atlantic City. As conservator, Justice Stein owns the Tropicana Atlantic

City’s assets.

            37.          Under New Jersey law, however, the Debtors remain the beneficial owner of the

equity interests in non-Debtor Adamar of New Jersey, Inc. and are entitled to receive the net

proceeds of the sale of the Tropicana Atlantic City. Under New Jersey law, though, net proceeds

that would revert to the Debtors are subject to a statutory cap calculated based on the actual cost

of the casino or the value of the equity interest as of the date that Justice Stein assumed control

(i.e., December 12, 2007); sale proceeds in excess of that statutory cap are forfeited to the State

of New Jersey under the applicable state law. Nevertheless, the Debtors’ beneficial interest in

the equity interests in non-Debtor Adamar of New Jersey, Inc. is a significant, valuable asset of

the Debtors’ bankruptcy estates.

            38.          Since his appointment, Justice Stein has been operating the Tropicana Atlantic

City and has been engaged in a marketing and sale process in accordance with New Jersey law,

which has hurt the Debtors in two ways: first, it caused a liquidity crisis for the Debtors; and

second, it likely may lead to a depressed sale price.

            39.          With respect to liquidity, since the Tropicana Atlantic City has been operated by

the trustee, the Debtors have been restricted under state law from having any access to any hotel



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

16
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


or casino cash. As trustee, New Jersey laws authorizes Justice Stein to remit to the Debtors

operating profits for the sole and express purpose of covering up to 43% of the OpCo Credit

Facility debt service that is allocable to the Tropicana Atlantic City collateral. The Debtors have

received several payments to cover such debt service, but those payments have recently ceased.

Thus, the Debtors have been in the position of having to continue servicing their debt in full

without any guaranteed contribution (and recently, without any contribution at all) from the

Tropicana Atlantic City profits. And this liquidity crisis has been exacerbated by the overall

depressed gaming and hotel revenue environment. Moreover, the Debtors were restricted under

the LandCo Credit Agreement from using cash generated from the Tropicana Las Vegas

operations to service its debt under the OpCo Credit Facility.

            40.          The trustee under a statutory mandate to sell the Tropicana Atlantic City by June

9, 2008. Accordingly, any sale by the trustee on the artificially compressed timetable imposed

by the New Jersey Commission will not maximize value. While there is always a possibility that

this deadline may be extended, given the previously discussed decline in gaming revenue, the fall

in real estate prices, and the tight credit market, any sale of a major casino asset in the near term

or perhaps medium term is unlikely to obtain a favorable price. For example, the Press of

Atlantic City Media Group has reported that, in many instances, construction on new casino sites

has either been delayed or abandoned altogether, explaining that credit markets have “all but

dried up financing right now for major casino projects.”12 Thus, because of the denial of the

Debtors’ casino license application, the Tropicana Atlantic City must be sold in an artificially

constrained timeframe into the teeth of an extremely inhospitable real estate market.


12    Donald Wittkowski, New Casino Proposed at Foot of Route 40 Entryway, The Press of
      Atlantic City, Apr. 19, 2008, available at http://www.pressofatlanticcity.com/186/
      story/137011.html.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

17
                                                                                       HIGHLY CONFIDENTIAL
                                                                                                DO NOT FILE


            41.          Just as importantly, Justice Stein does not own, control, or have any rights in the

equity or assets of Debtors Ramada New Jersey, Inc., Atlantic-Deauville, Inc., and Adamar

Garage Corporation, which collectively own a parking garage complex and a portion of the land

underneath the Tropicana Atlantic City upon which one of the three Tropicana Atlantic City

towers sits. Justice Stein also does not own or control the extremely valuable trade name

“Tropicana,” which has been synonymous with gambling for more than 50 years. Any sale of

the Tropicana Atlantic City without these valuable assets would lead to a dramatically lower sale

price. And, in any event, the Tropicana Atlantic City cannot be sold until the appeal process is

completed.

            42.          After engaged in preliminary discussions with their constituents, the Debtors

believe that there is an emerging consensus that to the extent that the Tropicana Atlantic City is

to be sold, such a sale should be pursuant to a process in accordance with section 363 of the

Bankruptcy Code, which will be transparent, coordinated, and intended to maximize the value of

the assets. Given the current status of the Tropicana Atlantic City, the Debtors recognize that

any such sale will require that the Debtors coordinate with Justice Stein.

            (ii)         Loss of Control over the Tropicana Evansville

            43.          The events in New Jersey have reached well beyond its borders. After the New

Jersey Commission’s ruling, the Indiana Gaming Commission staff asserted that the Debtors’

failure to renew their New Jersey license imperils their license to operate the Tropicana

Evansville casino (even though the non-renewal remains subject to appeal). Without conceding

the point, the Debtors agreed to an expedited sale of the Tropicana Evansville, and further

consented to the designation and appointment of Mr. Robert Dingman (who was succeeded by

Trinity Hill Group, LLC) as the Debtors’ attorney-in-fact to assist with overseeing the operations

at the Tropicana Evansville in the interim. Under their power of attorney agreement with Mr.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

18
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


Dingman (and now Trinity Hill Group, LLC), the Debtors retained the right to receive any

excess cash flow from the casino operations and the proceeds from any sale.

            44.          As of March 31, 2008, the Debtors entered into a securities purchase agreement

with Indiana Resorts, LLC and Eldorado Resorts, LLC to sell all of their outstanding

membership interests in Debtor Aztar Indiana Gaming Company, LLC (the legal entity that holds

the Tropicana Evansville), for $190 million in cash, a $30 million note to be issued by an

affiliate of the purchaser, and an “earn-out” payment of up to $25 million payable if the

purchaser achieves specified financial performance benchmarks. The sale remains pending. The

securities purchase agreement contemplates a potential chapter 11 filing by the Debtors and

includes provisions for the purchase agreement to form the basis of a stalking horse bid for a sale

process in accordance with section 363 of the Bankruptcy Code, and the Debtors intend to

coordinate with their constituents on the most appropriate way to address the Tropicana

Evansville. Just as with the Tropicana Atlantic City, given overall market conditions in the

gaming industry, the real estate market, and the credit markets, now is likely the worst time in

years to have to dispose of the Tropicana Evansville in an expedited fashion.

            (iii)        The License Denials Caused Defaults Under the Debtors’ Prepetition
                         Indebtedness

            45.          As discussed above, the Debtors already were under significant financial pressure

given the depressed gaming revenue environment. That pressure was only exacerbated by their

loss of control over, and revenue from, the Tropicana Atlantic City, and the imposition of the

expedited process to sell the Tropicana Evansville. The Debtors were then further beset by the

actions of certain of their creditors, who asserted various defaults under the Debtors’ prepetition

indebtedness. This led to costly and distracting litigation, several forbearance agreements, and

ultimately became the triggering event forcing a chapter 11 filing.


ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

19
                                                                                     HIGHLY CONFIDENTIAL
                                                                                              DO NOT FILE


                         a.           Default Under the OpCo Credit Facility and Forbearance Agreement

            46.          The New Jersey license denials constituted an immediate default under the OpCo

Credit Facility that could have led to the acceleration of the debt under that Facility (which

would have caused a cross-default under the LandCo Credit Facility and the Indenture). To

avoid this, effective December 12, 2007, Tropicana Entertainment LLC, certain of the OpCo

Guarantors, and certain of the OpCo Loan Parties entered into that certain Forbearance

Agreement, Consent and Waiver (the “OpCo Forbearance Agreement”), pursuant to which

certain of the OpCo Loan Parties agreed to, among other things, forbear, for up to one year, from

declaring a default under the OpCo Credit Agreement, arising out of, among other things, the

License Denials and certain other specified events.

            47.          In exchange for the OpCo Loan Parties’ agreement to forbear, the Debtors had to

make monthly—rather than quarterly—interest payments under the OpCo Credit Facility.

Moreover, certain terms of the OpCo Credit Agreement were restricted, including the permanent

reduction of both the OpCo Revolving Facility commitments from $180 million to $90 million

and the swingline sub-facility commitments from $60 million to $10 million, further limiting the

Debtors’ access to capital. Finally, the Debtors had to comply with additional restrictions and

reporting requirements contained in the OpCo Forbearance Agreement.

            48.          On April 30, 2008, the Debtors were scheduled to make an interest payment to the

OpCo Lenders of approximately $9.2 million. Given their limited cash availability, the Debtors

did not make that interest payment. On May 1, 2008, the administrative agent under the OpCo

Credit Facility delivered a notice to the Debtors alleging that they were in default under the

OpCo Forbearance Agreement on account of the failure to make the April 30 interest payment.

                         b.           Default Under the LandCo Credit Facility



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

20
                                                                                   HIGHLY CONFIDENTIAL
                                                                                            DO NOT FILE


            49.          On April 21, 2008, the administrative agent under the LandCo Credit Facility

delivered a notice to the Debtors alleging that there were outstanding defaults under the LandCo

Credit Agreement, including that the Debtors failed to deliver various information to the LandCo

lenders, including audited annual financial statements accompanied by an unqualified opinion of

an independent public accountant, consolidated projections for fiscal year 2008, and certain other

reports allegedly due under the LandCo Credit Agreement. According to the notice, certain of

the purported defaults constituted immediate events of default under the LandCo Credit

Agreement.              On May 2, 2008, the administrative agent under the LandCo Credit Facility

delivered another notice to the Debtors alleging that there was an additional cross-default under

the LandCo Credit Facility as a result of the Debtors’ failure to pay an interest payment due

under the OpCo Credit Facility and for the failure to notify the LandCo Credit Facility lenders of

such event of default.

            (iv)         Default Under the Unsecured Notes and Forbearance Agreement

            50.          On January 28, 2008, Wilmington Trust Company, purporting to act as successor

Indenture Trustee for Unsecured Noteholders, issued a declaration of acceleration and notice of

default, asserting that the New Jersey gaming license denials constituted an event of default

under the Indenture. On that same date, the Indenture Trustee filed an eleven-count complaint

commencing an action in the Court of Chancery of the State of Delaware against certain Debtors,

Mr. Yung, and Donna More, Tropicana Entertainment, LLC and TCR’s general counsel. In the

complaint, the Indenture Trustee sought, among other things, judgment for the entire outstanding

balance of the Unsecured Notes, a declaration that various other planned asset dispositions

constituted events of default under the Indenture, the appointment of receivers, and a judgment

(via a derivative action) against Mr. Yung and Ms. More for their alleged breaches of their

fiduciary duties in connection with the New Jersey license qualification and renewal denials.

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

21
                                                                                   HIGHLY CONFIDENTIAL
                                                                                            DO NOT FILE


            51.          The parties cross-moved for summary judgment with respect to the counts

alleging that the New Jersey licensing decisions and subsequent transfer of assets to Justice

Stein as conservator constituted events of default under the Indenture. On February 29, 2008, the

Delaware Court ruled in the Debtors’ favor on all issues except one, and held that the transfer of

the assets of the Tropicana Atlantic City to Justice Stein as conservator was a breach of the

Indenture, with a sixty-day cure period.

            52.          On March 12, 2008, Justice Stein filed a petition with the New Jersey

Commission requesting authority to return to Adamar the assets he held as conservator, in an

attempt to “cure” the one breach of the Indenture identified by the Delaware Court. In a

transparent attempt to perpetuate an event of default—for purposes of maximizing its negotiating

leverage—the Indenture Trustee sought to intervene in the proceedings and object to Justice

Stein’s proposed cure. On April 2, 2008, the New Jersey Commission denied the Indenture

Trustee’s motion to intervene, but also Justice Stein’s petition for relief, thus effectively

rebuffing the attempted cure of the breach.

            53.          While the litigation was proceeding in the Delaware Court, Wilmington Trust

Company issued a second declaration of acceleration and notice of default on February 20, 2008,

in an attempt to remedy problems with its initial notice on January 28, 2008. With the Indenture

Trustee alleging that the Debtors were in default under the Unsecured Notes, the lenders under

the OpCo Credit Facility refused to honor the Debtors’ draw requests under the OpCo Revolving

Facility, further aggravating the Debtors’ liquidity.

            54.          Shortly thereafter, on April 11, 2008, the Debtors, the Indenture Trustee, and

certain of the Unsecured Noteholders entered into a forbearance agreement, consent and waiver,

pursuant to which the Indenture Trustee and the Unsecured Noteholders essentially agreed,



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

22
                                                                                              HIGHLY CONFIDENTIAL
                                                                                                       DO NOT FILE


among other things, to forbear from exercising their remedies under the Indenture.                            The

forbearance agreement expired on April 30, 2008, but could be extended provided certain

conditions are met and/or certain fees were paid. On April 30, 2008, counsel to the Indenture

Trustee and certain Unsecured Noteholders agreed to extend the forbearance period through May

5, 2008. Given the expiration of this forbearance period, the Debtors had no choice but to

commence the Chapter 11 Cases to preserve their assets and the value of their estates.

F.          The Debtors’ Chapter 11 Filing Will Enable Them to Complete a Holistic
            Restructuring

            55.          The commencement of the Chapter 11 Cases is the next step in the Debtors’

restructuring and will enable the Debtors to execute on a multi-prong approach to maximize the

value of their assets for the benefit of all creditor and equity constituents and other parties in

interest, including customers, employees, gaming regulators and other governmental authorities,

and vendors and suppliers. During the Chapter 11 Cases, the Debtors intend to:

                         (a)          stabilize their operations and ensure a smooth transition into bankruptcy
                                      by securing the “first day” relief requested in the First Day Motions;

                         (b)          expand their management team and corporate oversight;

                         (c)          address the pending sale processes for the Atlantic City and Evansville
                                      casinos;

                         (d)          use their “bankruptcy tools” to address other restructuring issues;

                         (e)          examine strategic alternatives and develop an appropriate business plan to
                                      maximize value; and

                         (f)          negotiate, draft, and solicit votes for a plan of reorganization to enable
                                      them to exit bankruptcy protection.

            56.          The Debtors hope and expect that their restructuring approach will enable them to

exit chapter 11 expeditiously with properly restructured operations that will enable them to




ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

23
                                                                                     HIGHLY CONFIDENTIAL
                                                                                              DO NOT FILE


execute on their business plan, and with a capital structure that is appropriate in light of those

restructured operations.

            (i)          Stabilize Operations and Ensure Smooth Transition into Bankruptcy

            57.          It is imperative at this stage of the restructuring, on the first days of the

Chapter 11 Cases, for the Debtors to receive approval of the relief requested in the First Day

Motions. In light of the Debtors’ current liquidity position, it is most important that the Debtors

receive approval of the proposed debtor in possession senior secured financing and agreements

for the use of cash collateral, discussed more fully below. Having access to the $30 million

requested as part of the interim approval will enable the Debtors to honor obligations for which

they have requested first day relief and to pay or honor postpetition obligations in a timely

manner, including employee obligations for wages and employee benefits, customer programs,

and vendors and suppliers.                 The additional liquidity provided by the debtor in possession

financing is necessary to assure parties engaging in business with the Debtors that the Debtor

have appropriate liquidity to fund current and future obligations.

            58.          Receiving Court approval of the First Day Motions will allow the Debtors to

operate their businesses without interruption and meet their normal business obligations, which

is essential to giving the Debtors an opportunity to work towards achieving their restructuring

goals in a way that will benefit all of the Debtors’ constituents.

            (ii)         Expand the Debtors’ Management Team and Oversight

            59.          The Debtors have entered the chapter 11 restructuring phase and likewise have

supplemented their management team to deal with increasing responsibilities and demands that

are inherent in chapter 11 cases. In March 2008, I became President of Tropicana Entertainment,

LLC. In that role, I have principal responsibility for managing the operations of the businesses

and heading Tropicana Entertainment, LLC’s restructuring efforts. I expect to draw extensively

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

24
                                                                                   HIGHLY CONFIDENTIAL
                                                                                            DO NOT FILE


on my previous gaming experiences, especially in the restructuring context, during these

Chapter 11 Cases.

            60.          In furtherance of the Debtors’ commitment to expand their management team, the

Debtors announced on May 1, 2008, that Tropicana Entertainment, LLC hired Robert Kocienski

to serve as the new Senior Vice President, Chief Financial Officer, Treasurer, and Secretary. Mr.

Kocienski will have principal responsibility for Tropicana Entertainment, LLC’s financial

reporting and planning, including with respect to the chapter 11 process. He has over 30 years of

finance, accounting, and regulatory experience in the gaming industry.

            61.          Most recently, Mr. Kocienski was the Chief Financial Officer of the

Cosmopolitan Resort & Casino in Las Vegas, Nevada since June 2006, where he was responsible

for managing the finance related to the $3.4 billion project budget, transitioning the company

from construction phase to operating phase, and evaluating potential acquisitions. Prior to that,

he was the President and Chief Financial Officer of Torguson Gaming Group, Inc. in Bay St.

Louis, Mississippi since 2004 where he managed the financing and development of a significant

casino project. He has also served as the Chief Financial Officer at a number of other casinos,

including the Charles Town Races & Slots in Charles Town, West Virginia, the Mirage in Las

Vegas, Nevada, and the Golden Nugget in Las Vegas, Nevada, where his responsibilities

included managing finance functions (including reporting, internal controls, and operating

forecasts and budgets), operational functions, human resources, and union negotiations. While at

the Division of Gaming Enforcement in Trenton, New Jersey for six years, Mr. Kocienski

established and monitored accounting and internal controls, supervised audits of casino

operations, reviewed the financial stability of casino operations, and evaluated proposed

corporate restructurings. He will be a valuable addition to our management team. He will also



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

25
                                                                                    HIGHLY CONFIDENTIAL
                                                                                             DO NOT FILE


be assisted by AlixPartners, LLP, the Debtors’ restructuring advisors, on a variety of issues

relating to cash management, budgets, forecasting, and the like.

            62.          The Debtors are a closely-held, family-owned business. Yet, in light of the

situation facing them, the Debtors believed that it was appropriate to augment their corporate

governance and adopt what is generally considered best practices for public companies,

notwithstanding the nature of the Debtors’ private ownership.               As such, the Debtors have

embarked on an intense effort to identify, interview, and retain highly qualified, independent

outside directors. As part of the process, the Debtors identified necessary qualifications with

respect to the selection of the outside directors, including, among other things, the individual’s

independence, prior experience on boards of directors, and finance, gaming, or restructuring

experience. In concert with the Debtors’ advisors, including Kirkland & Ellis LLP and Lazard

Frères & Co. LLC, a number of highly respected and well qualified potential director candidates

have been identified.

            63.          To date, I have been given the responsibility of leading the selection process,

including conducting initial interviews with the candidates. Candidates are in the process of

participating in interviews with the Debtors’ key management individuals and advisors, which

allows all of the parties to conduct appropriate due diligence. Candidates have requested, among

other things, to meet with the Debtors’ in-house and outside legal counsel (as well as regulatory

counsel with regard to the requirements of the gaming regulators with respect to approval as a

director of the Debtors), meet certain key management individuals and discuss the Debtors’

situation prior to accepting an invitation to join the Debtors as directors, and discuss rights to

indemnification under the Debtors articles of incorporation and bylaws and relevant insurance

coverage.



ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

26
                                                                                         HIGHLY CONFIDENTIAL
                                                                                                  DO NOT FILE


            64.          The Debtors will ask selected candidates to complete a standard questionnaire to

confirm that they are indeed independent and that there are no issues that are likely to impact a

finding of suitability by the applicable state gaming authorities. Once the Debtors have made a

determination as to the candidates most qualified to serve as directors, they will extend offers to

these candidates.

            65.          I anticipate that, once the board is constituted with the new directors, the board of

directors will adopt appropriate governance policies, including forming appropriate committees,

such as an audit committee comprised of the outside directors. Additionally, the Debtors will

have to seek requisite regulatory approval of the outside directors from the appropriate

authorities in the states in which the Debtors operate their gaming facilities. Under applicable

state gaming laws, the directors will have the authority to act pending approval of the authorities.

            66.          While the Debtors, the Debtors’ advisors, and I have made considerable efforts in

this process, due to the importance of the process and the regulatory conditions to which the

Debtors’ businesses are subject, this process is necessarily time-consuming and could not be

completed prior to the expiration of the relevant forbearance period. I am confident that the

process will result in a board of directors that can effectively govern the Debtors’ enterprise. I

anticipate that this process will be completed within 30 to 45 days.

            67.          Another important aspect of the Debtors’ corporate governance is the manner in

which the Debtors’ advisors serve. Kirkland & Ellis LLP, Lazard Frères & Co. LLC, and

AlixPartners, LLP were retained by the Debtors and do not advise Columbia Sussex or Mr. Yung

or his family, which have retained Greenberg Traurig, LLP as their counsel and Perella

Weinberg Partners Group LP as their financial advisors.




ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

27
                                                                                            HIGHLY CONFIDENTIAL
                                                                                                     DO NOT FILE


            (iii)        Address the Sale Processes in Atlantic City and Evansville

            68.          As previously discussed, there are two pending sale processes for the Tropicana

Atlantic City and the Tropicana Evansville commenced as a result of the non-renewal of the

Debtors’ New Jersey gaming license.                         Currently, Justice Stein is operating the assets and

managing the sale process of the Tropicana Atlantic City. Shortly before the Petition Date, the

Debtors, Justice Stein, and the Debtors’ key creditor constituents began a productive dialogue

with the goal of exploring how best to maximize the value of the Tropicana Atlantic City for the

Debtors’ estates and stakeholders. The Debtors intend to continue to coordinate with each of the

key constituents to develop an appropriate process to maximize the value of the Tropicana

Atlantic City for the benefit of all constituents.

            69.          Moreover, the Debtors are party to a prepetition securities purchase agreement to

sell their equity interest in the Tropicana Evansville. The Debtors intend to consult with their

key stakeholders and move forward in light of that consultation.

            (iv)         Use the Debtors’ Bankruptcy Tools to Address Other Restructuring Issues

            70.          Throughout the Chapter 11 Cases, the Debtors intend to conduct a comprehensive

review of their operations to determine how to utilize their “bankruptcy tools” to their greatest

effect. For example, the Debtors, with their advisors, will analyze their executory contracts and

unexpired leases to determine which, if any, do not have beneficial value to the Debtors’ estates

and should, therefore, be rejected in accordance with section 365 of the Bankruptcy Code to

ensure that the Debtors do not unnecessarily incur administrative expenses for unprofitable

contracts and leases.                      Also, the Debtors, with their advisors, will evaluate their assets to

determine if any are burdensome or obsolete, in light of the Debtors’ restructured operations, and

should be liquidated in accordance with section 363 of the Bankruptcy Code. By completing this

comprehensive review and using their “bankruptcy tools” appropriately, the Debtors will be able

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

28
                                                                                     HIGHLY CONFIDENTIAL
                                                                                              DO NOT FILE


to rationalize their operations to generate additional liquidity through asset dispositions and

minimize their expenses through eliminating administrative obligations.

            (v)          Examine Strategic Alternatives and Develop an Appropriate Business Plan to
                         Maximize Value

            71.          The Debtors comprise an enterprise that controls many valuable assets, including

casino properties located throughout the United States and an easily-recognizable brand name in

“Tropicana” and intellectual property that has been associated with casinos for more than half a

century. After the Debtors have an opportunity to take a “breathing spell” and transition into

operating as a chapter 11 debtor in possession, they intend to explore their strategic alternatives

with their key constituents.

            72.          Through their analysis with their advisors and negotiations with their key

constituents, the Debtors will develop an appropriate business plan. Whether the Debtors’ value

is maximized through a sale or sales of assets or through a reorganization or through a

combination of both of these remains to be seen. There are a number of factors that will

influence this, and the Debtors intend to pursue an inclusive process that respects their key

constituents and seeks consensus in furtherance of maximizing value. This process will provide

the Debtors and their constituents with an opportunity to negotiate together so that their efforts

are directed towards a common goal, rather than at cross-purposes. The Debtors are committed,

and trust that their constituents are committed, to moving forward with this productive dialogue.

            (vi)         Negotiate, Draft, and Solicit Votes for a Plan of Reorganization to Enable the
                         Debtors to Exit Bankruptcy Protection

            73.          Once the Debtors have developed their business plan with advice from their

advisors and input from their key constituents, they will incorporate the business plan into a plan

of reorganization. The Debtors expect that this process will entail additional negotiations with

their constituents as the Debtors pursue approval of a disclosure statement, solicitation of votes

ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

29
                                                                                      HIGHLY CONFIDENTIAL
                                                                                               DO NOT FILE


in support of the plan of reorganization (and, in essence, the business plan), and confirmation of

the plan of reorganization.

            74.          I believe that there is significant value that can be maximized if the Debtors are

able to engage in a consensual process, which can occur if their constituents share the Debtors’

desire to move forward to maximize value. The Debtors are eager to begin this multi-prong

approach to restructuring the Debtors for the benefit of creditors and parties in interest. At this

point, the Debtors believe that approval of the First Day Motions is necessary for the parties to

take that first step.

                                       II.   SUMMARY OF FIRST DAY MOTIONS

A.

            75.

B.

            76.

C.

            77.

D.

            78.

E.

            79.

F.

            80.

G.

            81.




ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

30
                                                                                  HIGHLY CONFIDENTIAL
                                                                                           DO NOT FILE


                                            III.   CONCLUSION

            82.          To minimize any loss of value to their businesses, the Debtors’ immediate

objective is to engage in business as usual following the commencement of the Chapter 11 Cases

with as little interruption to the Debtors’ operations as possible. If this Court grants the relief

requested in the above discussed First Day Motions, the prospect of achieving these objectives—

to the maximum benefit of creditors, parties in interest, and the Debtors’ estates—will be

substantially enhanced.

Dated: May 5, 2008
Wilmington, Delaware
                                                   By:      /s/ Scott C. Butera
                                                   Name:    Scott C. Butera
                                                   Title:   President of Tropicana Entertainment, LLC




ea93c46a-9f92-4ef6-b918-ce495cb68eca.DOC

31

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:24
posted:9/10/2012
language:Korean
pages:31