Trump Hotels stock rises despite missed payment

Tuesday, May 4, 2004 | 11:04 a.m.

BLOOMBERG NEWS

ATLANTIC CITY -- Donald Trump's Trump Hotels & Casino Resorts Inc. missed a $73.1 million interest payment to bondholders due Monday, Executive Vice President Scott Butera said.

The company's Trump Atlantic City unit will make the payment before a 30-day grace period expires at the end of May, Atlantic City-based Trump Hotels said. The unit, which had $91.4 million in cash on hand at the end of March, needs about $50 million to operate its two casinos, Butera said.

The missed payment comes as the company is asking bondholders to restructure $1.8 billion in debt as a condition of a $400 million investment from Credit Suisse First Boston's private equity unit. Trump Hotels needs the investment to renovate its three Atlantic City casinos and remain competitive with rivals.

"The important thing is that the company intends to pay by the end of the month," said Andrew Susser, a debt analyst with Bank of America Securities in New York. "They should have sufficient cash to make the payment."

The coupon payment was due on $1.3 billion in debt on the Trump Atlantic City unit, which is secured by the Trump Taj Mahal and the Trump Plaza casinos in Atlantic City. The 11.25 percent Trump Atlantic City notes are due in 2006.

Trump's 11.25 percent notes maturing in 2006 last traded at between 85 cents and 86 cents on the dollar, little changed from its closing price on Friday, and at 84 cents at the end of March, according to traders and Citigroup Inc.'s high-yield corporate bond table.

Shares of Trump rose 18 cents to $1.98 at 4:15 p.m. in New York Stock Exchange composite trading Monday. The stock traded as high as $34 in June 1996.

The Star-Ledger of Newark reported last week the company would skip today's payment and file for a prepackaged bankruptcy by the end of May. Butera denied the report.

Trump Hotels on Friday said its first-quarter loss widened to $48.8 million, or $1.63 a share, from $24 million, or $1.09 a year earlier, hurt by a provision for higher income taxes. Revenue fell less than 1 percent to $348.2 million.

Trump Hotels auditor Ernst & Young raised doubts about the company's ability to continue as a going concern earlier this year after reviewing the company's annual results for 2002 and 2003.

This is the second time Trump Hotels has skipped a coupon payment on its debt. In November 2001, Trump missed a $91 million interest payment, saying that the Sept. 11 terrorist attacks and New York's plan to open Indian casinos meant bondholders should agree to restructure the debt. After a bondholders committee was established to negotiate, Trump made the payment before the grace period expired.

Trump Hotels' 2003 loss widened to $87.3 million after the opening of the $1.1 billion Borgata casino in Atlantic City. Trump Hotels executives have blamed the Borgata, owned by MGM MIRAGE and Boyd Gaming Corp., for a loss of customers. It is the first new casino in Atlantic City since 1990.

High interest rates on its debt have kept Trump Hotels from reinvesting in its properties as rivals in Atlantic City including Harrah's Entertainment Inc. add hotel towers, shopping malls and restaurants to lure back their regular patrons from the Borgata. Harrah's said profit at its two Atlantic City casinos rose in the first quarter after it added new hotel rooms to the Showboat casino.

If Trump Hotels doesn't make the payment before the end of the month, it goes into default and bondholders can take control of the assets, Merrill Lynch & Co. debt analyst John Maxwell said. The casino company is operated separately from Trump's real estate business, which includes condominium developments in New York. Chairman Trump, 57, was also the star of the NBC reality television show "The Apprentice."

Trump controls more than 50 percent of Trump Hotels stock when options are counted, according to a company filing with the Securities and Exchange Commission. If Credit Suisse's DLJ Merchant Banking Partners III LP provides the $400 million investment, Trump would remain chairman of the company, to be renamed Trump International Corp. The bank would become the casino company's majority shareholder.