It's not unusual in bankruptcy for the prosaic matter of utility bills to capture a lot of attention, because electricity and other utilities are essential to keeping a bankrupt business going, giving it a chance to reorganize.
In the case of Revel, there's a twist.
To build the utility plant, which chills water for Revel's air-conditioning, provides hot water, and distributes electricity to the 47-story tower, the plant's owner,
Conflict over what happens to the municipal-bond debt is likely to be a stumbling block in negotiations with prospective buyers. In practical terms, the bond debt is additional Revel debt under a 20-year contract because the casino is ACR's only customer.
The utility plant is also an example -- along with 13 restaurants and several entertainment firms that will likely lose significant investments when Revel closes -- of potential collateral damage from the casino's colossal failure.
The consequences of the restaurant closures are severe for employees and investors, but of little significance for potential reuses of the structure. If the utililty plant goes out of service, the consequences would be disastrous.
In hot weather, "if you shut down the electric utilities to the building, you're going to get an instant build-up of heat and humidity inside the building, both of which are terrible for finishes, equipment, and everything else that's inside that building," said
That makes it crucial to keep paying ACR, a joint venture of
The fight is over how much ACR will be paid.
"It's too early to tell, and at this point we can't speculate on what could happen with the property and the services we provide," Lockwood said.
Privately held DCO Energy, which is
Revel started building the power plant in
Recognizing that Revel was a risky proposition, ACR demanded a 15 percent return on its equity in the first five years and 18 percent after that.
Revel's fixed debt and equity payments to ACR total
By contrast, Borgata, including the
This year, Revel stopped making payments to ACR and owed nearly
Last week, ACR notified bondholders that it had received a notice of default in June from
In bankruptcy court, Revel has tried to separate fixed debt and equity payments to ACR from the variable energy payments.
ACR has fought to preserve the terms of the Revel contract, as in the 2013 bankruptcy, when ACR was paid in full and the bond debt was kept.
This time ACR is in a much tougher spot.
"There is absolutely no assurance that the [contract] will be assumed," if a buyer emerges, an ACR filing says.
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