Atlantic City finally got a loan from the state of New Jersey.

The big question now: Can the troubled casino town meet its obligations to stay out of financial trouble?

The AC loan comes through

The city received a loan in excess of $73 million this week, allowing the city to pay its bills as part of a state-brokered deal.

The city had to make a payment of more than $3 million on Monday, even though it had not yet received any of the funds for the agreed-upon loan. Moody’s Investors Service indicated it believed the city would default without the loan, according to Reuters.

The loan comes due in November, when the five-month window ends for the city to come up with a five-year budget plan to address its financial woes.

Can AC meet the terms of the loan?

From media reports, the terms of the loan aren’t terribly friendly to AC. Guardian called the termsextremely overreaching,” and indications were that the deal was even worse than the one agreed to.

Despite that fact, some are optimistic that the state can avoid short-term default and come up with a suitable long-term plan.

If AC can’t pay back the loan and/or come up with a plan the state finds acceptable, the city could be taken over by the state.

Not being able to pay the loan may not be a problem; more from the Press of AC:

City officials have said the state has no need to worry about the repayment. The city plans to use two years of casino marketing funds that would have gone to the Atlantic City Alliance — totaling $60 million — and $18 million from the Investment Alternative Tax as part of the rescue package signed in May.

The recovery plan is under construction, and some are optimistic that AC can get the job done. From Bloomberg:

Atlantic City is crafting a recovery plan to prevent New Jersey from taking over the distressed seaside gambling hub. Bondholders are betting it won’t entail default.

 

Local officials have tapped three firms for a financial blueprint that must be approved in November or the state can assume unprecedented control over the city’s finances. Mayor Don Guardian has said he wants to cut Atlantic City’s debt service, which totals about $37 million this year, or about 15 percent of its budget.

Christie and others in NJ government found it difficult to believe that AC could come up with a plan for long-term solvency, and that a state takeover will be inevitable. But the answer to that question may not come till the fall.

The lead-up to the AC loan

Back in the spring, the state legislature and Gov. Chris Christie finally agreed on a plan to help the city, without the need for an immediate state takeover of city government. That followed months of contentious negotiations.

But that didn’t end the bad blood between interested parties and government officials from AC/South Jersey and the rest of the state.

It has continued right up until the loan was actually given to the city, with Christie making it a “take-it-or-leave-it deal” to AC on the loan. According to Politico NJ:

“If they don’t sign the loan agreement that I’ve given them, they’re not getting the loan,” Christie said. If that means they go bankrupt, they go bankrupt. That’s their choice. But I’m tired of this.”

Dustin Gouker

About

Aside from his role as editor at LegalSportsReport.com, Dustin Gouker writes extensively about the legal online gaming and US online poker industries, having played poker recreationally for his entire adult life. He has also covered sports for The Washington Post and the D.C. Examiner, among others.