Thursday, Dec. 23, 2004 | 9:39 a.m.
A Trump Hotels & Casino Resorts Inc. shareholder sued billionaire Donald Trump and four other directors over the company's proposed plan to exit bankruptcy, saying it unfairly favors him as majority holder.
Holder Ariel Holdings LLC said in a suit filed yesterday in Delaware Chancery Court in Wilmington that the bankruptcy plan, proposed Dec. 15, serves Trump's "personal interests" and violates the board's fiduciary duties of loyalty and good faith to shareholders. The suit says Ariel owns more than 100,000 shares of Trump Hotels.
"Seizing upon the dire straits the company was placed in by virtue of his own mismanagement, under the subterfuge of a prepackaged bankruptcy plan, Trump has trampled upon the rights of" of shareholders, "diluting their interests to almost nothing, while shifting additional assets, compensation and equity into his own pocket," Ariel said in the suit.
Under the plan, which has to be approved by a bankruptcy judge, Trump would invest $55 million in Trump Hotels, keep his positions at the company and cut his ownership stake to 27 percent from 56 percent, according to court documents.
The suit says the plan would dilute shareholders' current 44 percent stake to .05 percent.
Shareholders, through a reverse stock split, would receive one share of the reorganized company for every thousand shares they currently own, according to bankruptcy court papers.
Shareholders also would 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.
Neither Trump spokesman Richard Rubenstein nor Trump Hotels President Scott Butera immediately responded to messages seeking comments.
The suit, which seeks to also represent other shareholders, asks the court to order Trump and other directors to act independently to protect the interests of all shareholders and to ensure there are no conflicts of interests between Trump and other shareholders. It also seeks fees and damages.
Trump Hotels shares rose 2 cents to $1.78 in over the counter trading at 10 a.m. New York time.
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