Missouri watches as N.J. relicenses Trump casinos

Rick Alm

Tuesday, June 29, 1999 | 11:12 a.m.

KANSAS CITY, Mo. -- New Jersey casino regulators relicensed Donald Trump's Atlantic City gambling palaces for four more years, despite concern over the Trump organization's financial stability and staggering corporate debt of $1.8 billion.

Missouri Gaming Commission agents were watching closely in New Jersey last week. They are reviewing the New York real estate tycoon's surprise bid earlier this year to buy and operate the troubled Flamingo Hilton Casino in Kansas City, Mo.

"The only thing I can say is we're aware of the financial situation of Trump and continue to investigate it," said Mel Fisher, the commission's executive director.

Trump officials in New York and Atlantic City did not return calls late Wednesday.

New Jersey casino regulators concluded that Trump's successful Taj Mahal and Plaza casinos in Atlantic City were propping up his troubled Marina casino there and just barely provided adequate cash flow to support an interlocking ownership web of Trump companies.

Any downturn in the gambling business -- always a worry in Atlantic City -- could deepen cash shortfalls throughout Trump's casino empire, said James R. Hurley, chairman of the New Jersey Casino Control Commission.

"It is uncertain whether the growth achieved in 1997 and 1998 can be improved upon," Hurley said in a lengthy statement before he recommended that the casino licenses be renewed.

"On balance, (publicly traded parent Trump Hotels & Casino Resorts Inc.) and its subsidiaries' cash flow appear to be sufficient in the aggregate to fund their cash needs through 2001," Hurley said.

New Jersey commission spokesman Dan Heneghan said no one testified against Trump or registered objections to relicensing of his casino companies.

The proceeding in New Jersey also revealed that Trump later this year will add $25 million in new long-term corporate debt to finance his purchase and cosmetic makeover of the Flamingo Hilton.

New Jersey regulators are forecasting a break-even operation in Kansas City at best. They also said they didn't expect Trump's Kansas City operation any time soon to contribute positive cash flow that could assist the parent firm's financial picture.

Despite $5 million in monthly gross revenue, the Flamingo Hilton in Kansas City operates at a loss.

In January, Hilton Hotels Corp. jumped at Trump's $15 million purchase offer.

Last summer, Hilton agreed to pay the federal government more than $500,000 in fines and penalties to avoid a criminal trial on charges that it provided financial rewards to then-Kansas City Port Authority Chairman Elbert Anderson in exchange for his political support for the casino to be built on city-owned land.

Federal and state government investigations led to fears that Hilton would have been fined, suspended or stripped of its Missouri license by the Missouri Gaming Commission. If so, other jurisdictions with Hilton casinos probably would have taken their own disciplinary actions against the company, jeopardizing the viability of the billion-dollar, worldwide gambling and hospitality giant.

Trump offered Hilton an expedient way out, despite the Flamingo's $100 million construction price tag.

The Beverly Hills, Calif., company agreed to voluntarily surrender its Missouri gambling license when its riverboat is sold to Trump Hotels & Casino Resorts Inc. and Trump receives its state gambling license.

Fisher on Wednesday would not set a timetable on when Missouri might be ready to open public hearings on Trump's license application.

Meanwhile, the Kansas City Port Authority last week approved assigning the Flamingo's lease to a local firm controlled by Trump. Under that deal, Trump Kansas City LLC would hold the lease and operate the casino.

Lease terms include more than $30 million in rent payments owed to Kansas City through 2006.