Trump Forced
to Quit Trump Entertainment, Bankruptcy Possible (Update3)
By Beth Jinks
Feb. 13 (Bloomberg) -- Donald Trump resigned from the
board of Trump Entertainment Resorts Inc.,
the debt-laden casino company he founded, ahead of a possible involuntary
bankruptcy filing next week.
“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.
Tom Hickey, a spokesman for
Trump Entertainment, and Chief Financial Officer John Burke didn’t return phone
messages left after normal business hours.
‘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.
‘Bad Decisions’
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.
Atlantic City
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.
Past Bankruptcy
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.
To contact the reporter on this story: Beth Jinks in New York at [email protected]