Document Page 1 of 12 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY Caption in compliance with D.N.J. LBR 9004-2(c) FOX ROTHSCHILD LLP (Formed in the Commonwealth of Pennsylvania) Michael J. Viscount, Jr., Esq. Raymond M. Patella, Esq. 1301 Atlantic Avenue, Suite 400 Atlantic City, NJ 08401 (609) 348-4515/fax (609) 348-6834 mviscount@foxrothschild.com rpatella@foxrothschild.com WHITE & CASE LLP John K. Cunningham, Esq. (admitted pro hac vice) Richard S. Kebrdle, Esq. (admitted pro hac vice) Kevin M. McGill, Esq. (admitted pro hac vice) Southeast Financial Center 200 South Biscayne Blvd., Suite 4900 Miami, FL 33131 (305) 371-2700/fax (305) 358-5744 jcunningham@whitecase.com rkebrdle@whitecase.com kmcgill@whitecase.com Co-Counsel to the Debtors and Debtors in Possession In re: REVEL AC, INC., et al., Chapter 11 Case No. 14-22654 (GMB) Debtors. 1 Jointly Administered DEBTORS STATUS REPORT Revel AC, Inc. ( Revel ) and its affiliated debtors and debtors in possession (collectively, the Debtors ) in the above-captioned chapter 11 cases (the Chapter 11 Cases ) 1 The Debtors in these chapter 11 cases, along with the last four digits of each debtor s federal tax identification number, are: Revel AC, Inc. (3856), Revel AC, LLC (4456), Revel Atlantic City, LLC (9513), Revel Entertainment Group, LLC (2321), NB Acquisition, LLC (9387) and SI LLC (3856). The location of the Debtors corporate headquarters is 500 Boardwalk, Atlantic City, New Jersey 08401.
Document Page 2 of 12 hereby file this status report (the Status Report ) pursuant the Court s instruction at the August 18, 2014 hearing. STATUS REPORT The Sale Process 1. The Debtors own and operate the Revel Casino Resort ( Revel ) - a state of the art casino resort hotel on the boardwalk in Atlantic City. The Debtors filed these Chapter 11 Cases on June 19, 2014 (the Petition Date ) with the stated goal and intention of pursuing a sale of Revel. To that end, the Debtors hired Moelis & Company ( Moelis ) as their investment banker and obtained approval by the Court of up to $25 million in debtor-in-possession financing (the DIP Financing ) from the Debtors largest first lien lender, Wells Fargo (the DIP Lender ). The Debtors also sought and obtained approval by the Court of bid procedures with respect to the sale process, as set forth in that certain Corrected Order (A) Authorizing and Approving Bid Procedures to be Employed in Connection with the Proposed Sale of the Assets of the Debtors, (B) Scheduling an Auction and Sale Hearing, (C) Authorizing and Approving Assignment Procedures, (D) Approving the Manner and Form of Notice of the Auction and Assignment Procedures and (E) Granting Related Relief dated July 14, 2014 (the Bid Procedures Order ). 2. The Bid Procedures Order fixed two dates in the sale process: (i) July 18, 2014 as the deadline for submission of non-binding letters of intent by potential bidders (the LOI Deadline ), and August 4, 2014 as the final bid deadline (the Bid Deadline ). The Debtors received numerous letters of intent from potential bidders by the LOI Deadline, and a few bids by the Bid Deadline. 2
Document Page 3 of 12 3. None of the bids submitted by the Bid Deadline, however, constituted Qualified Bids in accordance with the Court s Bid Procedures Order. Namely, to be a Qualified Bid the Bid Procedures Order required, among other things: (a) (b) A cash deposit of 10% of the purchase price; Reasonable proof acceptable to the Debtors of the bidder s ability to consummate the transaction, including financial wherewithal and regulatory approvals to close; and (c) A binding, definitive and executed asset purchase agreement containing no unperformed due diligence or financing contingencies. 4. The submitted bids by the Bid Deadline either did not comply with one or more of the above requirements or contained a purchase price that was not acceptable to the Debtors and/or the DIP Lender. Notably, the DIP Financing contains a requirement that at least one bid must be satisfactory to the DIP Lender. 5. Section 3(h) of the Bid Procedures Order provides: The Debtors reserve the right, in consultation with the Consultation Parties, to modify the Bid Procedures in any manner that will best promote the goals of the Sale; provided, however, that any such modification must be in form and substance reasonably satisfactory to the DIP Agent and the Required Lenders under the DIP Credit Agreement. 6. In accordance with the foregoing reservation of rights and in consultation with the DIP Lender, the Official Committee of Unsecured Creditors (the Committee ) and representatives of the Tranche B Term Loan and Second Lien Lenders (collectively, the Consultation Parties ), the Debtors elected to postpone the Auction (as defined in the Bid Procedures Order) and engage potential bidders in further discussions to resolve outstanding 3
Document Page 4 of 12 issues with the bids in order to become qualified under the Bid Procedures Order. The Debtors filed their first notice of continuance of the Auction on August 6, 2014 (the First Notice ), and a subsequent notice of continuance of the Auction without date on August 13, 2014 (the Second Notice ). The First Notice and Second Notice are attached hereto as Exhibits A and B, respectively. 7. With respect to continuance of the Auction, the Second Notice states: [T]he Debtors have continued to evaluate the bids received and have been working with certain potential bidders with the goal of naming a Successful Bidder. As a result of those ongoing negotiations and in an effort to maximize the prospects for a value maximizing sale transaction, the Debtors have determined, in exercise of their business judgment, consistent with their fiduciary duties and in consultation with the Consultation Parties, that they require additional time before commencing the Auction. Therefore, the Debtors will adjourn the Auction until a date to be determined by the Debtors. 8. At the August 18, 2014 hearing in these Chapter 11 Cases, the Debtors further updated the Court on the status of the sale process, as well as the Debtors decision to cease operations commencing on September 1, 2014 (the Shutdown Plan ). Notably, as set forth on the record of the August 18th hearing, the Debtors continue to incur substantial operating losses and no bidder has made a Qualified Bid to acquire Revel as a going concern. To stem the Debtors losses from operations, the Debtors have met with the New Jersey Division of Gaming Enforcement ( DGE ) regarding approval of Revel s Shutdown Plan. A description of the DGE-approved Shutdown Plan is described more fully below. 9. The Debtors remain hopeful that (i) a Qualified Bid will emerge from continued negotiations with potential bidders and (ii) a competitive Auction for the sale of Revel will develop. At this time, however, the Debtors are unable to set a definitive timeframe for the 4
Document Page 5 of 12 sale process. The Debtors have tentatively scheduled a further hearing on the sale motion for September 2, 2014 and will file a further Status Report with the Court on or before September 15, 2015. The Debtors will also provide notice of the commencement of any Auction in accordance with the Bid Procedures Order. 10. Finally, the DIP Lender has expressed a willingness to extend the DIP Financing in these Chapter 11 Cases pursuant to an approved budget. The Shutdown Plan 11. On August 18, 2014, the Debtors filed a petition with the DGE for approval of the Shutdown Plan for the orderly shutdown of operations at Revel. A brief summary of the Debtors Shutdown Plan is provided below. A. Closure of Business and Surrender of Licenses and Certificates 12. Revel Entertainment Group, LLC ( REG ) holds a casino license issued by the Casino Control Commission, a certificate of operation ( Operation Certificate ) issued by the DGE that allows the Debtors casino and resort ( Revel Casino Resort ) to remain open to the public for gaming activities, and a Casino Hotel Alcoholic Beverage ( CHAB ) license issued by the DGE and covering both the Debtors operations and those of their tenants. 13. The Debtors plan to cease gaming operations at the Revel Casino Resort at 6:00 a.m. on September 2, 2014 (the Shutdown Date ) and be closed to the public thereafter. According to the Shutdown Plan, the Revel Casino Resort will have a normal schedule of operations through Sunday, August 31, 2014. On August 31, 2014, after certain restaurants, bars, pools and cabanas, owned and operated by the Debtors (collectively, Locations ) close at their respective normal business hours, the Debtors will begin to remove perishable goods, safeguard alcoholic beverages and secure equipment from those Locations. By the Shutdown 5
Document Page 6 of 12 Date, all Locations will be closed. 14. With regard to the alcoholic beverages the Debtors own, the Debtors will safeguard or dispose of the remaining inventory in accordance with DGE regulations upon shutdown of their operations. All opened bottles of alcohol will be discarded and all unopened bottles of alcohol will be packaged. The Debtors will inventory the unopened alcoholic beverages in each Location and transport such alcohol to storage. Security will be provided to ensure safekeeping. Subsequently, the Debtors will return or sell the stored alcohol subject to DGE approval. 15. Upon the cessation of their operations, the Debtors will surrender their Operation Certificate (as amended) and their CHAB license to the DGE, and will surrender their casino license to the Casino Control Commission. B. Redemption of Vouchers and Chips 16. During the normal course of the Debtors business operations, the Debtors issue slot vouchers in connection with patron winnings from the Debtors slot machines, certain of which remain outstanding (the Outstanding Slot Vouchers ). The Debtors also have outstanding unredeemed chips liability (the Unredeemed Chips ) from patrons who fail to convert their chips to cash before leaving the Revel Casino Resort. 17. Pursuant to the Shutdown Plan, the Debtors will continue to honor the Outstanding Slot Vouchers and the Unredeemed Chips in the ordinary course of their business before the Shutdown Date. For two weeks following the Shutdown Date, ending on September 15, 2014, the Debtors will maintain sufficient funds to permit patrons to redeem any Outstanding Slot Vouchers and Unredeemed Chips at the general cashier cage. The patrons will enter through the Revel Casino Resort s employee entrance and be escorted to the general cashier 6
Document Page 7 of 12 cage. The Shutdown Plan provides that such redemption activity and the cash at the general cashier location shall be balanced and reconciled daily in accordance with the Debtors established reconciliation procedures. Following such two week period, patrons with Outstanding Slot Vouchers and Unredeemed Chips will have unsecured claims that will need to be pursued in these Chapter 11 Cases, and all funds remaining at the Debtors facility shall be deposited via armored car. 18. To ensure notice to patrons, the Debtors will use a variety of methods to provide notice of the Outstanding Slot Vouchers and Unredeemed Chips. The Debtors published in the August 20, 2014 edition of the Press of Atlantic City a notice of the redemption procedures. The Debtors will also notify patrons of the redemption procedures through phone-in message and the Reservation Guest Care telephone line through September 15, 2014. The notice of the redemption procedures will be placed on the Debtors website (www.revelresorts.com) and in hotel rooms and other conspicuous areas. Further, the Debtors will advertise the redemption procedures through their social media outlets. C. Collecting Counterchecks 19. In the ordinary course of business, the Debtors provided credit to patrons by issuing counterchecks ( Counterchecks ). As of August 12, 2014, the Debtors ended such practice. Until the Shutdown Date, the Debtors will deposit the Counterchecks in their bank in accordance with applicable law and their internal controls. The Debtors will reach out to patrons to notify them that they may redeem outstanding Counterchecks before the Shutdown Date. Prior to September 15, 2014, any payment, redemption or return of Counterchecks will be processed in accordance with existing internal controls. After September 15, 2014, any payment, redemption or return of Counterchecks will be addressed through the liquidating plan in these 7
Document Page 8 of 12 Chapter 11 Cases. D. Return of Front Money, Safekeeping Winnings and Unclaimed Funds 20. In the ordinary course of business, the Debtors hold certain customer winnings in safekeeping until the customer claims those winnings ( Safekeeping Winnings ). In addition, in the ordinary course of their business, the Debtors provide a service whereby customers may deposit funds with the casino cage and later withdraw those funds while at a gaming table ( Front Money ). The Debtors have and will continue to exercise reasonable efforts to return the Front Money, Safekeeping Winnings and any other unclaimed funds held by the Debtors. The Debtors will notify those patrons who have Front Money, Safekeeping Winnings or are associated with unclaimed funds of the shutdown and provide instructions for the return of such funds. The Debtors will mail a refund check to any patron who requests a refund in accordance with such instructions. For any patron who requests a refund of Front Money, Safekeeping Winnings or unclaimed funds between the Shutdown Date and September 15, 2014, the payment will be processed in accordance with existing internal controls. After September 15, 2014, the unredeemed Front Money, Safekeeping Winnings and unclaimed funds will be placed in an account held by one of the Debtors professionals. 21. The Debtors will send a final notice to patrons who had deposited Front Money, Safekeeping Winnings or unclaimed funds to notify them that they are required to file a proof of claim in these Chapter 11 Cases to seek the return of such funds. Any Front Money, Safekeeping and unclaimed funds not claimed by a proof of claim within the period as ordered by the Court, will be escheated to the State of New Jersey in accordance with escheatment requirements. 8
Document Page 9 of 12 E. Progressive Jackpots 22. During the ordinary course of the Debtors business, the Debtors operate certain progressive jackpot games, including both progressive slot jackpot games and progressive table jackpot games (together, the Progressive Games ). The Progressive Games accumulate funds wagered over a period of time until such funds are won and paid out. As of August 7, 2014, and in connection with the Progressive Games, the Debtors had outstanding liability of approximately $1.75 million. In connection with the shutdown, the Debtors have posted notice on all Progressive Games stating the Debtors intent to terminate the Progressive Games on the Shutdown Date. Following the Shutdown Date, the Debtors will terminate the Progressive Games in a manner consistent with the applicable requirements of the agreements governing such games. F. Records Retention 23. The Debtors are required to maintain certain business records in a secure site approved by the DGE. The Debtors have developed a plan to account for the retention of the Debtors business records following the shutdown. In short, the Debtors will arrange for the storage of paper records with a storage facility identified by the DGE, and will work with the DGE and providers to develop a technologically and economically feasible plan to store the electronic records. The Debtors will prepay for such storage for the period of time required by the DGE, and will consult with the DGE regarding providing access to such stored records. G. Security Plan and Wind Down Staffing 24. The Debtors currently maintain a closed circuit television system according to specifications that have been approved by the DGE. The Debtors will continue to operate and maintain such system following the Shutdown Date for purposes of winding down 9
Document Page 10 of 12 the business operations at the Revel Casino Resort. The Debtors have also developed a plan to maintain sufficient security at the Revel Casino Resort until the Shutdown Date, and will maintain operational staff and structure following the Shutdown Date pursuant to a wind down staffing plan. H. Outstanding Tax and Fee Obligations 25. Following the Debtors cessation of their gaming operations on the Shutdown Date, the Debtors will pay all required fees, interest, penalties and taxes in accordance with a budget and procedures prepared in consultation with the DGE. Such budget will take into consideration all required accounting functions related to such payments, and will include expected timing related to required payments. I. Waiver of Annual Audit Requirement 26. In connection with the Debtors cessation of their gaming operations, the Debtors have requested that the DGE exempt the Debtors from obtaining an audit of their financial statements for the fiscal years ended December 31, 2013, December 31, 2014 and all fiscal years thereafter. J. Approval of Additional Closure Plans 27. The Shutdown Plan submitted to the DGE by the Debtors additionally includes an internal audit plan, a patron complaint plan and a hotel closure plan. Further Updates 28. As stated above, the Debtors will file a further status report on the sale process and implementation of the Shutdown Plan on or before September 15, 2014. Notice 29. Notice of this Status Report has been provided to (i) the Office of the 10
Document Page 11 of 12 United States Trustee for the District of New Jersey, (ii) counsel to the First Lien Lenders, (iii) counsel to the Second Lien Lenders, (iv) counsel to the DIP Agent, (v) counsel to the Creditors Committee, (vi) all parties requesting notices pursuant to Bankruptcy Rule 2002, (vii) the Office of the Attorney General for the State of New Jersey, (viii) the New Jersey Division of Gaming Enforcement, (ix) the New Jersey Casino Control Commission, (x) the Office of the Governor for the State of New Jersey, (xi) the United States Attorneys Office for the District of New Jersey, (xii) the United States Attorney General, (xiii) the Internal Revenue Service and (xiv) the Securities and Exchange Commission. The Debtors submit that no other or further notice need be provided. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11
Document Page 12 of 12 Dated: August 25, 2014 Atlantic City, New Jersey FOX ROTHSCHILD LLP By: /s/ Michael J. Viscount, Jr. Michael J. Viscount, Jr., Esq. Raymond M. Patella, Esq. 1301 Atlantic Avenue, Suite 400 Atlantic City, NJ 08401 (609) 348-4515/fax (609) 348-6834 mviscount@foxrothschild.com rpatella@foxrothschild.com and John K. Cunningham, Esq. (admitted pro hac vice) Richard S. Kebrdle, Esq. (admitted pro hac vice) Kevin M. McGill, Esq. (admitted pro hac vice) WHITE & CASE LLP Southeast Financial Center 200 South Biscayne Boulevard, Suite 4900 Miami, Florida 33131 (305) 371-2700/fax (305) 358-5744 jcunningham@whitecase.com rkebrdle@whitecase.com kmcgill@whitecase.com Co-Counsel to the Debtors and Debtors in Possession 12
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