Trump Hotels Files Chapter 11; Donald Trump's Stake Will Drop

23 November 2004
The Wall Street Journal

Trump Hotels & Casino Resorts Inc., which is controlled by Donald Trump through a 47% stake, filed for Chapter 11 protection from creditors in federal bankruptcy court in New Jersey.

The filing is part of a broad refinancing plan aimed at reducing the casino company's $1.8 billion debt load and, ultimately, sprucing up the casinos to make them more competitive. The plan, which was announced Oct. 21, must be approved by the court before taking effect.

This is the second bankruptcy-court filing for Trump casinos. The three debt-loaded Atlantic City properties entered bankruptcy proceedings in 1992 during a recession. Yesterday, Mr. Trump avoided referring to "bankruptcy" in a news release about the latest move, saying instead that the company "has commenced its recapitalization plan . . . in Camden, New Jersey."

The current proceedings have been agreed to by many creditors. Bondholder groups have accepted lower interest payments, and shareholders have seen their stock delisted from the New York Stock Exchange. The shares now trade on the electronic Bulletin Board. Under the new plan, Mr. Trump's ownership interest will drop to 27%. The stake held by other shareholders will be sliced to 0.05% from 44%, according to the filing.

While Trump Hotel investors are taking a haircut, the company is paying all of its casino vendors. "We have good deals with the vendors and we want to continue to have that," Mr. Trump said in an interview yesterday .

Trump Hotels owns and operates the Taj Mahal, Trump Marina, and Trump Plaza casinos in Atlantic City, as well as a riverboat in Indiana. It also manages the Trump 29 Indian casino near Palm Springs, Calif.

A decade-worth of financial losses and the strain of meeting its debt obligations left little money for upkeep or the development of new attractions. As a result, Trump's casinos have been running down, just as fresh competition has been arising in Atlantic City with hip new attractions like the Borgata, a casino hotel.

In addition to refinancing its debt, Trump Hotels has arranged to borrow as much as $100 million from Beal Bank in Dallas. The loan, which will be secured by a lien on the company's casinos, will be used in part to renovate them and to expand the Trump Taj Mahal in Atlantic City.

The new financing terms are expected to save the company about $100 million a year in interest expense, said Mr. Trump, who noted that he expects Trump Hotels to be profitable after the refinancing is completed.