Supply companies with ties to bankrupt casinos face losses

When Atlantic City casino hotels went bankrupt in the past - no uncommon occurrence - suppliers could count on getting 60 percent to 80 percent of what they were owed.

Like much else in Atlantic City, that has changed.

"There's no reason to believe we'll ever get very much of it at all," said Nelson Dilg, whose Egg Harbor City, N.J., company cleans kitchen hoods and grease traps, and has experienced earlier rounds of casino bankruptcies.

The Atlantic Club, Revel AC Inc., and Trump Entertainment Resorts Inc., the three Atlantic City casino operators that have filed for bankruptcy protection since last November, owe Dilg's Nelbud Services Group Inc. $200,000.

Dilg called the bankruptcies a "very big hit," but limited in impact on the overall company because Nelbud, which has had the backing of private equity since 2006, used Atlantic City as a launchpad to expand its operations up and down the East Coast.

Nelbud is just one of dozens of area companies that depended on the casinos for millions in revenue each month and that are left holding the bag.

Casino hotels depend on battalions of vendors: bakeries, produce and meat suppliers, direct mailers, marketing firms, billboard owners, and wine and liquor distributors - not to mention legions of lawyers, accountants, and utilities.

The vendors' losses from the bankruptcies and closures constitute a second wave of economic impact beyond the direct loss of 7,000 jobs at the four closed casinos. Showboat is the fourth casino to close, but it was not in bankruptcy.

In the case of Atlantic Club, about 50 companies based in the region stretching from Philadelphia's western suburbs to Atlantic City are still owed about $1 million, according to claims registered in bankruptcy court.

The recovery for those "general unsecured claims" was estimated to range from nothing to 28 percent of what they are owed, but so far nothing has been paid, vendors said.

When Revel filed for its second bankruptcy in June, the company reported owing 125 local suppliers, not including utilities, nearly $3 million.

That number is likely significantly lower now because an unknown number of those firms were deemed "essential vendors." That means the court allowed Revel to pay those vendors for goods and services that were delivered in the 20 days before the bankruptcy filing.

Those not in that group could be out of luck.

ACR Energy Partners L.L.C., Revel's supplier of hot and cold water for heating and cooling, called it "apparent that substantially all proceeds" from the sale of Revel will go to secured lenders, leaving little for anyone else.

At least one vendor appears to be in better shape in the Revel bankruptcy than in the bankruptcies of the Atlantic Club and Trump.

That is the commercial launderer Atlantic City Linen Supply L.L.C. and its sister company, ACLS Pleasantville L.L.C., which was created in 2008 when Atlantic City Linen's then-owners spent $10 million renovating a historic building in Pleasantville, N.J., for an expansion.

In the Atlantic Club bankruptcy, ACLS Pleasantville was owed $94,351, according to the claims register. In the Trump bankruptcy, records show that Atlantic City Linen Supply is owed $250,819.

But in the Revel bankruptcy, the laundry firms are owed just $16,756.

On June 19, the day Revel filed for bankruptcy protection, the company wired payments totaling $1.9 million to 14 vendors, a court filing shows.

Most of the money - $1.5 million - was sent to gaming suppliers. Atlantic City Linen and ACLS Pleasantville received, in aggregate, $129,117, suggesting that they were considered essential vendors.

Eric Goldberg, co-chief executive, along with his brother, Daniel, of Atlantic City Linen Supply, declined to comment on the impact of the bankruptcies.

According to a May news release, the Goldberg family sold a majority interest in the company, which was founded in 1986, to Alvarez & Marsal Capital, which is affiliated with Alvarez & Marsal, a turnaround-services firm.

Goldberg's reluctance to talk about the bankruptcies was not unusual. A dozen companies contacted by The Inquirer last week either declined to comment on the impact of the bankruptcies or did not respond to messages.

Dilg was willing to talk because he's worried about a bigger problem.

The inevitable shrinking of the Atlantic City casino industry will have a painful, across-the-board impact on that region.

"The tragedy in this is that once Atlantic City has settled out and redefined itself as a much smaller market than it used to be, my fear for the local community and for Atlantic County is that you now have an economy that can only support half of what is there," Dilg said.

There will be too many people, too many homes, Dilg said.

"That's a tragedy that won't be realized for a long time," he said. "It's going to be very sad for a lot of people."