Tahoe casinos' owner in trouble

Two of Lake Tahoe's four big casinos are headed into bankruptcy protection, putting further pressure on a resort area struggling against Northern California's Indian casinos.

Tropicana Entertainment LLC, the debt-laden owner of the Horizon and MontBleu casinos at Lake Tahoe, said Monday it filed for protection under Chapter 11 of the bankruptcy code. The company said it would continue operating its nine casinos, which include the famous Tropicana in Las Vegas.

The legal move comes as Nevada's gambling industry appears to be struggling with some of the same problems afflicting the nation's economy. Gambling revenue on Lake Tahoe's south shore is down 5 percent from a year ago, according to the Nevada Gaming Control Board, and Las Vegas' gambling revenue is essentially flat.

Overnight stays at Tahoe's south shore hotels and motels has fallen 16 percent in the past decade, according to the Lake Tahoe Visitors Authority. Last summer was particularly difficult, with wildfires scaring off tourists for part of the season.

In Las Vegas, the number of visitors has fallen slightly, according to the Associated Press, and in January the Cosmopolitan, a casino under construction on the Vegas Strip, defaulted on a $760 million construction loan.

The soft gambling market has hurt the Nevada economy: The state had the highest foreclosure rate in the nation last year, according to RealtyTrac.

Even with the Horizon and MontBleu expected to stay open on the south shore, their owner's filing for bankruptcy "is definitely not good news" for the market, said Richard Wells of Wells Gaming Research, a Reno consulting firm.

Tom Callahan, co-chief executive of San Francisco hospitality consultant PKF Consulting, said the Chapter 11 filing won't necessarily hurt the two hotels unless "they have to start cutting corners." By keeping creditors at bay, it might actually help the properties, he said.

Yet there already have been allegations that the Horizon and MontBleu haven't been properly maintained by Tropicana. In a lawsuit that was settled last month, the two properties' landlord, Park Cattle Co., accused Tropicana of turning the 539-room Horizon into a dump by skimping on maintenance. Park Cattle said Tropicana scaled back the maintenance staff at the MontBleu (formerly Caesars), setting the stage for a potential tailspin at that property as well.

Under the settlement, Tropicana agreed to pay Park Cattle $165 million, surrender the Horizon in three years and run the place properly in the interim.

The chairman of Park Cattle said last month that, rather than try to compete with the California casinos, he expects to convert the Horizon into something other than a casino when the property changes hands.

Patrick Ronan, a hotel owner who chairs the visitors authority, acknowledged the impact of Indian gaming but said the decline in visitors is due partly to the phasing-out of low-end motels in favor of more upscale properties. He said total revenue has grown.

He said the bankruptcy filing of the ownwers of the Horizon and MontBleu won't hurt business.

Bill Warne, a lawyer for Park Cattle, said the bankruptcy filing wasn't a total surprise and isn't expected to affect the $165 million settlement or the operations at either hotel. He said the settlement was made with a Tropicana affiliate, not Tropicana itself. The payout "is not being funded by the entity that filed for Chapter 11," he said.

Tropicana's financial problems have been building since 2006, when the company, then known as Columbia Sussex, spent about $2 billion buying a company called Aztar. Aztar's holdings included the Tropicana in Vegas and Atlantic City, N.J.

Last December, the company was stripped of its gambling license in Atlantic City after regulators said it cut back too far on staffing. In April, the company received a default notice on a $1.32 billion loan from investment bank Credit Suisse and said a bankruptcy filing was a possibility.

On Monday, Scott Butera, president of Tropicana, told the Associated Press that the firm's filing for bankruptcy protection wouldn't disrupt operations at the company's hotels.

"I'm sure the customer will be rewarded as we do better things and invest in our assets," he said.

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