Trump Forced to Quit Trump Entertainment, Bankruptcy Possible (Update3)
By Beth Jinks
“I’m not managing it, it’s not me that’s responsible for managing,” Trump, who was chairman, said in a telephone interview today. “Unless we’re going to be responsible for management it’s just not something that’s worthwhile.”
Trump’s departure comes ahead of a Feb. 17 deadline to make a $53 million bond payment originally due on Dec. 1. The Atlantic City, New Jersey-based casino operator said at the time it needed to conserve cash and hold debt-restructuring talks with lenders. Since an initial grace period ended on Dec. 31, Trump Entertainment’s deadline has been extended four times.
The 62-year-old real estate entrepreneur has “no idea” whether there will be a bankruptcy filing, he said. Trump is “not thrilled” the company may continue to use his name.
Bondholders are planning to force Trump Entertainment into Chapter 11 bankruptcy early next week, the Wall Street Journal reported today, citing unidentified people familiar with the matter.
Trump controls 28 percent of the stock, according to a March 21 regulatory filing. His daughter, Ivanka Trump, also resigned, according to an e-mailed statement.
“I strongly disagree with the bondholders’ decisions and actions,” Trump said in the statement without elaborating.
‘It’s a Disaster’
In the interview, Trump cited the “disastrous” fates of Atlantic City’s Tropicana Casino Hotel and the under-construction but not fully funded Revel Entertainment LLC project.
“It’s a disaster and I see what’s happened with so many others, and I don’t want to be a part of it,” Trump said.
Tropicana Entertainment LLC was pushed into bankruptcy after being stripped of its New Jersey gambling license. State officials said in December 2007 that the Tropicana Casino Hotel’s service and cleanliness had declined and the property wasn’t being run according to state regulations.
Revel Entertainment last month suspended interior work, unable to secure needed financing to finish construction at the 20-acre boardwalk site. Revel had been scheduled to open mid- 2010.
Trump Entertainment’s three casinos have been through bankruptcy twice. Holders of most of company’s $1.25 billion in notes and Beal Bank Nevada, which is owed $490 million, have agreed not to exercise default rights for interest or principal payments until 9 a.m. New York time on Feb. 17.
The company’s market value has tumbled to $7.3 million from its peak at $842 million in August 2005.
Trump Entertainment’s 8.5 percent note due June 2015 traded at 14 cents on the dollar today, according to Trace, the bond- pricing system of the Financial Industry Regulatory Authority.
Bondholder representatives “have made a series of bad decisions and encouraged wasteful spending, which has led to severe problems within the company,” Trump said in the statement. “The company is no longer operated to a standard consistent with other of my holdings.”
Trump offered to buy the rest of the company and was turned down by bondholders, according to the statement. Legal and consulting fees “will suck the blood from the company,” as Atlantic City “tanks and competition from local markets grows,” he said.
Gambling revenue in the seaside resort city fell a record 7.6 percent in 2008, the second straight annual decline as the recession deterred some gamblers, and slot-machine competition from nearby states wooed others. The decline continued in January, with revenue down 9.4 percent.
MGM Mirage last year shelved its planned Atlantic City development, and real-estate developer Curtis Bashaw and former Caesars Entertainment Inc. chief Wally Barr withdrew their building application for a casino resort last month.
Penn National Gaming Inc. said Feb. 5 it won’t exercise its option to buy a 23-acre site in Atlantic City, citing the revenue declines and more future competition from Las Vegas Sands’ under- construction casino in Bethlehem, Pennsylvania, and expectations Philadelphia will open casinos.
Trump Entertainment emerged from bankruptcy 3 1/2 years ago. Its predecessor, Trump Hotels & Casino Resorts Inc., sought court protection in November 2004. It had lost money for nine years because of high interest payments that Trump claimed prevented the company from refurbishing and expanding its casinos.
The three casino resorts also went through bankruptcy in the 1990s.
Trump Entertainment said Oct. 28 that it renegotiated the sale of its Trump Marina to Coastal Marina LLC down to $270 million, from the $316 million agreed upon in May, after the buyer missed a financing deadline.
The company’s biggest bond investors include Franklin Mutual Advisers Inc., Northeast Investors Trust and Massachusetts Financial Services, according to compiled by Bloomberg.
Representatives of bond investors Northeast Investors Trust, Putnam Investments LLC and the John Hancock High Yield Fund couldn’t be reached for comment after business hours.
Bondholders hired Stroock & Stroock & Lavan LLP law firm to file the involuntary bankruptcy documents, the Wall Street Journal said. Houlihan Lokey Howard & Zukin are financial advisers, according to the newspaper.
Trump Entertainment hired law firm Weil Gotshal & Manges LLP as bankruptcy counsel, the Journal said.