Trump Hotels & Casino Resorts files plan to exit bankruptcy

Tom Becker

Thursday, Dec. 16, 2004 | 9:25 a.m.

Donald Trump's hotel and casino business filed a plan to exit bankruptcy that leaves him as chairman, while giving bondholders a controlling equity stake in the company and new notes in exchange for their debt.

Trump, star of NBC's reality show, "The Apprentice," will invest $55 million in Trump Hotels & Casino Resorts Inc., documents filed today with the U.S. Bankruptcy Court in Camden, N.J., said. The terms are the same as those reached between the company and its creditors prior to the bankruptcy filing.

Under its terms, the 58-year-old real-estate billionaire would keep his positions at the company while cutting his ownership stake to 27 percent from 56 percent. Bondholders would exchange their debt for $74 million in cash, $395 million in common stock and $1.25 billion in new notes. More than half the bondholders have already signed agreements supporting the plan.

"We are very pleased with the way the case is going and we hope to get the plan approved soon," said Scott Butera, the Trump Hotels president. "This plan puts us on track to exit some time in March."

The company owns four casinos and has $1.8 billion in debt. It sought protection in November and will be able to exit bankruptcy in March if creditors and the court approve the plan.

Morgan Stanley, the No. 2 U.S. securities firm, has agreed to provide a $500 million loan to Trump Hotels to help fund operations, subject to court approval.

U.S. Bankruptcy Judge Judith H. Wizmur today gave the company interim approval for a $100 million financing agreement with Beal Bank. Trump Hotels will use the financing to fund expenses, including employee wages, vendor payments and leases. Wizmur said a formal committee of equity holders could review the financing agreement and raise any concerns before Dec. 31.

The plan includes a reverse stock split through which common shareholders would receive one share of the reorganized company for every thousand shares they currently own. Shareholders would also receive one-year warrants to purchase more than 3.4 million shares of new common stock with an aggregate purchase price of $50 million, or $14.60 per share, according to the plan.

The company intends to add a tower to its Taj Mahal casino in Atlantic City and refurbish its other locations, Butera said. Trump Hotels is also considering opening casinos in additional, undisclosed locations, he said.

"The next step for Trump will be to upgrade the deficiencies' in the casinos," said Barbara Cappaert, debt analyst with KDP Investment Advisors Inc. "They have older slot machines, they haven't had significant amenity upgrades. There's a lot of catching up to do."

The case is the second casino bankruptcy for Trump. The Taj Mahal filed for bankruptcy in 1990.

Trump Hotels shares rose 1 cent to $1.48 in over the counter trading.