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Isle of Capri Casinos'


plan to build a Chicago area casino has hit a critical delay as the State of Illinois moved to revoke the company's recently won gaming license, starting a legal process that could take years to sort out.

On Tuesday, Illinois Attorney General Lisa Madigan said the state would take back its tenth -- and last -- gaming license, which has spawned a number of controversies after Isle

won it two months ago. Madigan's move will send the license dispute to the courts, which could take years to resolve the matter, lengthening a process that has already been hung up for years, when the original holder of the state's tenth license, Emerald Casino, went bankrupt.

In late March, after Isle's $518 million bid beat out

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Harrah's Entertainment's

( HET) $520 million bid for the dormant Emerald license, Madigan said the Illinois Gaming Board "ignored key criteria in assessing the bids," questioned Isle's financial condition and raised concerns over organized crime in Rosemont, Ill., where Isle wanted to build a 40,000-square foot casino.

Late Tuesday, Isle vowed to fight Madigan and said it would continue to pursue the approvals needed to build the Rosemont casino from the bankruptcy courts and from the IGB. In reaction to the news, shares of Isle were down 34 cents, or 1.7%, to $19.94 early Wednesday morning.

"We played by the rules and we believe the process, created by Madigan, was fair and open," said Timothy Hinkley, president and COO of Isle. "We strongly believe that Madigan's action is not in the best interest of the people of Illinois. In the announcement today the AG did not provided any new information; instead this process has become a game of political one-up-man-ship."

In the eyes of the Illinois Gaming Board, the Isle bid was preferable to rivals, if only because the company planned to pick up where Emerald Casino left off, using the infrastructure that had already been built on the property. Also, Isle had attempted to clean up some of Emerald's bankruptcy mess, reaching a $45 million settlement with an Emerald creditor, potentially speeding up the timeline to get the casino open and generating revenue for the state of Illinois.

The latest turn of events not only puts Isle's attempt to build a casino up in the air, it will also likely affect the company's credit rating. After Isle announced plans to spend more than $150 million to finish the Roseland casino, Standard & Poor's downgraded the company's long-term debt rating to negative from stable.