Icahn Buys Atlantic City's Tropicana Casino For Bargain

Before the collapse of the markets, it was expected to fetch over $1 billion. Instead, Carl Icahn and his investment group snatched up the Tropicana Hotel and Casino in Atlantic City for $200 million. They were able to do so by offering up a portion of the debt from their $1.4 billion mortgage on the property:

The Icahn group was the only one to submit a bid for one of Atlantic City's largest casinos by the Friday deadline. Sean Mack, the attorney for the conservator who has been overseeing the sale process, said the investors group could be approved as the new owners by a bankruptcy judge by June 12.

It would then need to get temporary approval from New Jersey casino regulators, and apply for a full casino license, which could take a year to get. The new owners would apply for interim casino authorization, which typically lasts nine months, and can be extended for another 3 months beyond that, said Dan Heneghan, a spokesman for the state Casino Control Commission.

The investors, including Icahn, hold a $1.4 billion mortgage on the Tropicana. That enabled them to craft their offer in a way that competitors were unable to match.

They agreed to act as a so-called "stalking horse," laying down a minimum offer in bankruptcy court that sets the floor for bids. If no one else exceeds it, the stalking horse gets the casino.

The investors offered $200 million of their debt for the casino. That required other parties to offer more than $200 million in cash or securities -- something no one else was willing to do.

What's surprising is that there were no other offers, despite the low bid. The property has value based on its location on the Boardwalk and yet it received only one bid, which is perhaps a testament to the ongoing tight credit problems facing most American businesses despite the government's attempts to free up more credit. It remains to be seen if Icahn can turn around the casino's fortunes.