By DONALD WITTKOWSKI, Staff Writer, 609-272-7258
(Published: Monday, March 16, 2009)

ATLANTIC CITY � A group of lenders that includes billionaire investor and former Atlantic City casino owner Carl C. Icahn emerged Monday as the front-runner to buy the troubled Tropicana Casino and Resort in a bankruptcy auction.

However, the proposed purchase price was not revealed in documents submitted to the New Jersey Casino Control Commission designating the lenders as the so-called �stalking horse,� or leading bidder, in the sale.

�My understanding is that it hasn�t been disclosed yet,� said Michael Freitag, a spokesman for Gary S. Stein, a retired New Jersey Supreme Court justice who has been overseeing the sale as Tropicana�s state-appointed conservator.

Icahn, the former owner of the now-defunct Sands Casino Hotel, is among the secured lenders who hold a $1.4 billion mortgage on the Tropicana casino hotel. Plans call for Icahn and other major investors who are on the lenders� steering committee to use part of the mortgage to make a �credit bid� on the casino.

The secured lenders will assume the role of stalking horse when Tropicana is auctioned off in bankruptcy in coming weeks, although the sale date has not been scheduled yet. The stalking horse sets a minimum bid and acquires the property if no one else makes a higher offer.

Tropicana has been on the market and under Stein�s control since its former owner was stripped of its gaming license in December 2007 following mass layoffs and regulatory violations. Efforts to sell the property have been hindered by legal squabbles over its ownership, the recession and the global credit crisis.

The next step is for the Casino Control Commission to review and then approve the documents that were jointly filed by Stein and the secured lenders Monday evening. They include a 98-page proposed agreement of sale and the bidding procedures for the bankruptcy auction.

�This clearly is a significant step forward toward a resolution of this matter,� commission spokesman Daniel Heneghan said. �I anticipate that the commission and other interested parties will begin the review process immediately. Approval of this proposed transaction will likely occur at a meeting next month.�

Gilbert L. Brooks, an attorney representing the secured lenders, stressed that the agreement has not been finalized and significant �open issues� still must be negotiated.

At its next meeting Wednesday, the commission is expected to extend the sale deadline to give more time to complete the complicated transaction. Brooks said Stein will seek approval for a six-month extension.

Icahn Associates Corp. and other investment firms that make up the secured lenders have replaced the Cordish Co., a Baltimore real estate developer, as Tropicana�s leading bidder. Cordish initially offered $700 million in cash and notes or $575 million in an all-cash deal when it was named the stalking horse last fall. However, Cordish later lowered its offer to an undisclosed price in response to the faltering economy and ultimately failed to reach a deal with Stein.

Documents filed with the commission Monday show that the secured lenders are considering two possible ownership structures if they are successful in buying the casino. They would either place Tropicana under a new entity that they control or will turn it over to a newly created subsidiary of former owner Tropicana Entertainment LLC. Tropicana Entertainment is restructuring itself in Chapter 11 bankruptcy and expects to emerge as a new company with new management and ownership.

Despite its downward slide under its previous ownership, Tropicana has begun to stabilize in recent months and is in no danger of closing, regulators said. The bankruptcy auction is expected to clear up any legal and financial impediments that have threatened the sale in the past.

�The Chapter 11 bankruptcy route is simply the easiest way to sell the property free of all liens and encumbrances,� Heneghan said. �It�s not for financial distress. Some people are under the wrong impression that Tropicana is in grave financial shape.�