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LAS VEGAS-Tropicana Entertainment LLC this week filed its plan of reorganization with the federal bankruptcy court in Delaware. The plan calls for a substantial portion of the company’s $2.74 billion of long-term debt to be converted to common stock, thereby substantially deleveraging the company’s balance sheet, leaving it with a serviceable amount of debt and positive cash flow.

Specifically, the plan would split the company into two entities. The OpCo would hold 10 of the company’s 11 resorts while LandCo would be comprised solely of the Tropicana Las Vegas. The secured component of OpCo’s $2.3 billion indebtedness would be converted to common stock and the unsecured component canceled, while all $442 million of LandCo’s secured debt would be converted to common stock.

In addition, the $67 million outstanding under its debtor in possession (DIP) financing facility and would be taken out and certain allowed administrative and tax claims would be paid in full. Finally, neither former owner William Yung nor any of his affiliates will own any equity in the reorganized Tropicana. Creditors reportedly blame Young for the company’s decline.

Tropicana Entertainment filed for Chapter 11 bankruptcy in May 2008 after it defaulted on nearly $2.7 billion in bonds. The default was prompted by the New Jersey Casino Control Commission’s vote Dec. 12, 2007, not to renew the license for Tropicana’s Atlantic City property, its biggest asset. In August 2008, Tropicana president and CEO Scott Butera was named to the four-man team appointed by the courts to guide the company through bankruptcy. In September, Butera began negotiations with the Cordish Co. for the sale of the Tropicana Atlantic City for $700 million. No deal has been announced.

In stumping for the plan, Butera says it will restore the company’s financial viability, maximize the opportunity to regain control of casino operations in New Jersey and Indiana, continue rebuilding infrastructure compromised prior to commencement of the restructuring, and produce value-enhancing returns for its future equity owners. “As we developed our plan, we had a unique opportunity to examine the new world of gaming and we believe that the company is well positioned to operate in a more cost sensitive, value conscious industry,” he said.

Tropicana says its five-year plan calls for the company to grow its revenue base, maintain its current level of operating expenses and improve net income. During that period the company expects to make $275 million of capital investments to refurbish and revamp its casinos and resorts.

Last week, Tropicana named Richard Baldwin its new VP, CFO and treasurer. Baldwin replaces Robert Kocienski, who resigned. The company also tapped gaming executive Ron Thacker to be president of Tropicana Las Vegas.

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