Judge Denies Approval for Glenn Straub’s Purchase of Revel Casino for $82 Million

In another startling turn of events, advisors to Revel AC, the owners of the Revel Casino Hotel, failed to gain approval for an agreement to sell the casino resort for $82 million. Judge Gloria Burns told the owners of the hotel property to look for a better price.

Judge Burns’ decision might clear the way for a last-minute bid by Los Angeles developer, Izek Shomof. Mr. Shomof’s attorney said in Wednesday’s court hearing that his client could offer more money than Polo North.

Revel’s Bankruptcy History

The casino property has had several apparent purchase deals fall through over the past 6 months. Revel Casino cost $2.4 billion to build, but it stayed in business only 29 months, from April 2012 to September 2014. In October 2014, the casino went up for bankrutpcy sale. A Canadian company eventually won the bid for $110 million, but eventually pulled out of the process.

During the court hearing in Camden, New Jersey, Judge Burns told Revel’s lawyers, “I think in order for me to be comfortable with this you need to satisfy me that every stone has been overturned to find the best deal.”

Enter: Izek Shomof

On Wednesday, Revel Casino’s owners had asked the judge to approve the sale to Glenn Straub, but Shomof’s attorney claimed that the current sale was handled in an unfair manner. Shomof’s lawyer claimed Glenn Straub had threatened to sue his client for interfering with the purchase, thus barring the LA developer from doing due diligence.

Gloria Burns only delayed the sale for a week, but the delay might derail the current sale process. Lawyers and advisors for Revel AC had advised the judge to approve the sale, given the difficulty the casino’s owners have had finding a buyer. It was clear that Revel AC wants to take the sure deal, after so many months of failed negotiations and auctions.

Wells Fargo Threatened a Pull-Out

One reason Revel’s people were anxious to make a deal was a concern that Wells Fargo, the financial institution financing the bankruptcy process, might pull out of that role if delays happened. Advisors for Wells Fargo told the judge on Wednesday they might pull out of the deal, if yet another delay occurred.

In response to that unveiled threat, Judge Burns responded, “Then maybe a conversion to a Chapter 7 is the right way to go.”

How Bankruptcy Works

Chapter 11 bankruptcy allows a company to reorganize its assets. In Chapter 7 bankruptcy, a piecemeal liquidation sale is performed to sell a business’s constituent parts. Such a process is overseen by an independent trustee.

Under the process, Revel AC could be in the bankruptcy process for months more. The bankruptcy has spawned several lawsuits, while Revel Casino’s owners pocketed an $11 million deposit from Brookfield Asset Management. At a point, the company also pocketed another $10 million from Glenn Straub, though it has never been confirmed whether that deposit went toward the purchase price of the casino or not.

In either case, observers of the sale of the Atlantic City casino have remarked that the process has been a particularly complicated and contentious one. Until the day Revel AC and Polo North came to their (now-defunct) agreement, they had been in a legal and public relations battle. Whether the latest twist in this ongoing sage leads to more scathing public statements and files lawsuits is in the air. Given the recent history of the case, it sounds likely.

Shomof and Friends Visit

On Thursday, Izek Shomof made a visit to Atlantic City with a business partner, Danny Lahov. Meanwhile, a second business partner, Leo Pustilnikov, has made several public comments. Leo Pustilnikov appears to be the most vocal member of the trio. When asked about his group’s plans, Mr. Pustilnikov said, “We’ve had reasonable success in acquiring properties in similar situations in Los Angeles, taking properties that were hemorrhaging cash and stabilizing them and turning them around. We would like to do nothing different here.”

At the same time, Izek Shomof seems to have a talent for pithy soundbites. When asked about his reasons for being in Atlantic City, Mr. Shomof jokingly said, “We are ready to count the money. We don’t know who to give it to.“