Morgan-Backed Casino May Have Funding Gap

A spokesman for Revel Entertainment wouldn't say whether the casino has obtained financing. Last month, Revel CEO Kevin DeSanctis tried to address the matter in an interview with a New Jersey newspaper.

"We started putting piles in the ground in early 2007," DeSanctis told the Courier-Post, based in Cherry Hill. "The financial market collapsed in August 2007. We didn't expect it to last more than one or two quarters, but it's taken significantly more time. It's not a matter of will we get the money for the project, but how much will it cost. We were far along when the credit market problem hit. We were in a place where it's hard to stop."

Eric Green, portfolio manager at Penn Capital Management, believes Morgan Stanley was preparing to issue debt securities to finance the deal this summer, when the death of three executives at Revel and another at contractorTishman Construction in a plane crash put those plans on hold.

"They could have raised some money," Green says.

Since the government takeover of Fannie Mae (FNM Quote), Freddie Mac(FRE Quote) and AIG (AIG Quote), however, and the bankruptcy of Lehman Brothers, financing of all kinds is challenged to say the least.

The executive close to Morgan Stanley says it is possible to stop construction of the casino, but declined to comment on whether that is being considered. He says he is optimistic about the project because no comparable casinos are being built right now.

Revel is planning to construct a facility that has two hotel towers with around 1,900 rooms each, 150,000 square feet of casino space and 500,000 square feet for dining, retail stores and entertainment.

Penn Capital's Green believes that if the project can be completed, it will be in a good position to succeed. "The Revel is going to be a beautiful property, and it'll be very competitive with anything in the city and will definitely be successful there," he says.