'Prepackaged' bankruptcy plan set for Trump casinos
By John Curran
Associated Press
ATLANTIC CITY, N.J. — He made millions in real estate, built a casino empire and conquered television with a reality show that turned "You're fired" into a national catch phrase.
Associated Press
But Donald Trump's glitzy, neon-trimmed casinos have busted. Now, they're headed for bankruptcy court, a $400 million bailout and a new corporate structure in which he surrenders much of his control.
Donald Trump's casinos, including the Trump Taj Mahal in Atlantic City, N.J., face restructuring under a bankruptcy protection plan announced Monday that would strip Trump of his majority stake.
The roulette wheels will keep spinning and the nickel slots will keep eating coins at Trump Taj Mahal, Trump Plaza and Trump Marina, but parent corporation Trump Hotels & Casino Resorts Inc. may soon have new bosses.
Under a plan announced late Monday, the company will file for a Chapter 11 bankruptcy next month, emerging within a year. The deal is a "prepackaged" bankruptcy, one that has a plan in place at the start to revive a struggling company.
Saddled with $220 million in yearly interest payments and unable to generate enough cash keep pace with newer, richer competitors, Trump Hotels will get a bailout from DLJ Merchant Banking Partners — an arm of Credit Suisse First Boston — aimed at reducing the company's $1.8 billion in debt.
Trump, whose smiling, carefully coifed image shows up on billboards and sweepstakes come-ons all over Atlantic City, is worth an estimated $2.5 billion, according to Forbes magazine, which earlier this year rated him among the 400 richest Americans.
Trump himself would contribute almost $71 million, $55 million of which would be in the form of a co-investment with Credit Suisse and $15.9 million of which would come from his Trump Casino Holdings notes.
Trump would remain chairman of the board, but would relinquish his CEO title. And he would see his stake in his casino company shrink from 56 percent to 25 percent, with Credit Suisse owning more than two-thirds of the company.
The bankruptcy plan is expected to cut Trump Hotels' debt by $544 million to $1.25 billion, drop the average interest rate on debts from about 12 percent to less than 8 percent, and cut annual interest expenses by more than $110 million.
"I'm really happy about it. Even though it's a small portion of my net worth, it's an important company to me," he said in an interview yesterday.
It's important to investors, too. A majority of those holding $1.3 billion worth of bonds backed by Trump Taj Mahal and Trump Plaza have signed off on the plan, which calls for them to receive $282 million in cash, $851 million in new debt and $107 million in stock in the new company.
Those who own bonds backed by Trump Marina and Trump Indiana — which operates a riverboat casino in Gary, Ind. — also have been offered a combination of cash, stock and debt but have not yet agreed to the restructuring plan.
"I get the sense that what he's trying to do is test the waters, see if anyone squawks, in putting out his planned proposal a month before he files," said attorney Daniel Sklar, a bankruptcy specialist with Nixon Peabody in Boston.
"It will probably end up being more of an opening offer than what the final plan looks like," said Sklar.
Credit Suisse First Boston, meanwhile, is betting its cash can help turn around Trump's three Atlantic City casino-hotels and give it the financial resources to expand into other jurisdictions such as neighboring Pennsylvania, which recently approved slot machine gambling.
Trump Hotels stock was suspended from trading by the New York Stock Exchange yesterday. The company's stock traded as high as $34 in 1996 before beginning a long slide to less than $2 a share on Monday.
If the deal goes through, it would be the second time Trump casinos filed for bankruptcy court protection. In 1992, Trump Taj Mahal, Trump Castle and Trump Plaza ended up in Chapter 11, burdened by more than $1 billion in debt and hurt by the 1990-91 recession.
Trump later regained control of the casinos, but high interest payments ate away at the company's bottom line, making it impossible to finance capital improvements or expansions at a time when many of his Atlantic City competitors were building new hotel towers, sprucing up their casino games and luring his gamblers away.
