Casino Operator Tropicana Expected
To File for Bankruptcy Protection
By JEFFREY MCCRACKEN AND TAMARA AUDI
May 5, 2008 4:52 p.m.

Struggling casino operator Tropicana Entertainment LLC is expected to file for bankruptcy protection as early as today, said two people familiar with the matter. It would be the largest corporate bankruptcy of the year, and the latest blow to Las Vegas, which has seen gambling revenues decline and major building projects canceled or delayed in the last few months.

Kentucky-based Tropicana has a small casino empire which includes the famed Tropicana Resort & Casino in Las Vegas and a host of small regional casinos from Mississippi to Baton Rouge.

The company, which has annual sales of around $1 billion with 11,000 employees, missed an interest payment Friday on a $1.32 billion loan with lender Credit Suisse and isn't expected to make that payment, said these two people. Missing the payment then terminates a forbearance agreement it had with bondholders, putting further pressure on the gaming company.

A Tropicana spokesperson declined to comment.

Tropicana Entertainment was formed in 2006 when William Yung III -- who also owns and operates Columbia Sussex, a large hotel-property owner -- struck a deal to purchase Aztar Corp. for $1.94 billion. Mr. Yung bested competitors in a fierce bidding war and reset casino values in Las Vegas, paying an estimated $30 million an acre to gain control of Aztar's crown jewel: the storied Tropicana Las Vegas.

But Tropicana has been stumbling since late last year, when New Jersey regulators stripped the company of its gambling license to operate a Tropicana casino in Atlantic City. The unusual license revocation came after severe cutbacks Mr. Yung made at the property, which regulators said left it poorly managed in violation of New Jersey regulations. Columbia Sussex will not be part of the bankruptcy filing, said these people.

Tropicana had $2.67 billion in rated bank and bond debt, according to Moody's Investor Service. The largest previous bankruptcy filing of the year was Quebecor World Inc., which had rated debt of approximately $1.8 billion.

Tropicana bonds, which come due December 2014, traded around 50 cents last week.

"Tropicana had high leverage right out of the box," said Peggy Holloway, Moody's vice president and senior credit officer, who has Tropicana rated Caa3, its third-lowest rating.

"Gaming operators overall are facing headwinds from the broader economy. And unlike some past recessions, casinos are not proving to be recession proof this time around," she said.

The company has retained Kirkland & Ellis LLP. as bankruptcy counsel and Lazard Ltd. as financial advisor, said these people. It is expected to file in Wilmington, Delaware.

Lenders on one Tropicana credit agreement have retained the firm of Houlihan Lokey Howard & Zukin as financial advisrr. Bondholders have retained Jefferies & Co.

The filing "will not be pre-packaged. It's really kinda last minute with no real plan in place," said one person briefed on the filing.

Robert