Revel AC Inc. has filed for Chapter 11 bankruptcy protection with a prepackaged plan that if confirmed, will give its lenders ownership of its Atlantic City, N.J. casino.

The news comes as casino M&A is expected to pick up, evidenced by deals such as Pinnacle Entertainment Inc. (NYSE: PNK)’s $2.8 billion purchase of Ameristar Casinos Inc. (Nasdaq: ASCA). The industry is also expected to expand into new territories, with more states considering gaming expansion proposals.

The plan for Revel includes a debt for equity swap, which will leave the company with $272 million in debt, from the more than $1.5 billion it currently has.

Of the casino’s outstanding loans, $923 million in term loans will be converted into 100 percent of new common equity under the plan, court documents show.

As of March 13, the company had about $1.45 billion in outstanding debt from a $192 million senior secured credit agreement, an $896 million term loan and $366 million under 12 percent second lien notes due 2018. The debtor also had unpaid interest and fees on its loans totaling about $49.4 million, according to court papers.

Plan supporters include about 87 percent of the credit agreement lenders, 76 percent of the term loan lenders and 76 percent of the second lien note holders.

Some of the holders of the credit facility claims will provide Revel with a $250 million priming debtor-in-possession (DIP) credit facility, which will be used to pay outstanding loans under the credit facility, which total about $208 million including fees and interest, court documents show.

The casino’s lenders include Canyon Capital Advisors and Chatham Asset Management, according to reports.

The plan also includes an exit facility, in which claimholders from the company’s credit and term loan agreements are eligible to participate. The loan would include a first lien $75 million revolving credit facility that would provide Revel with the capital to run the business once it exits bankruptcy, and a second lien $260 million term loan which would be used to repay the DIP loan and other transaction expenses.

Judge Judith H. Wizmur of the U.S. Bankruptcy Court for the District of New Jersey in Camden is presiding over the case. Revel has requested she preside over a confirmation before May 15.

The casino operated with losses of $35 million and $37 million, respectively, in the second and third quarters of 2012. The casino was hurt by the economy, which it says has also increased consolidation among gaming companies, including Pinnacle and Boyd Gaming Corp.’s purchase of Peninsula Gaming.

Revel filed for bankruptcy protection on March 25.

Kirkland & Ellis LLP is debtor counsel, while Morton R. Branzburg of Klehr Harrison Harvey Branzburg & Ellers is co-counsel. 

For more on the gaming industry, see “The Buyside: Pinnacle Deal Signifies Gaming Comeback.” 

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