Trump Hotels to seek bankruptcy in agreement with bondholders

Jeannine DeFoe

Thursday, Oct. 21, 2004 | 11:05 a.m.

Trump Hotels & Casino Resorts Inc. reached an agreement with bondholders that will reduce the company's debt through a bankruptcy and leave Chairman Donald Trump, best known as the billionaire tycoon of NBC's "The Apprentice," in charge.

The agreement with a majority of bondholders would reduce the company's approximately $1.8 billion in debt by $400 million as part of a filing for Chapter 11 bankruptcy protection expected by the end of November, the Atlantic City-based company said in a statement. Some of the company's bonds rose.

Bankruptcy would ease the debt burden for the company, which has lost money for eight years and lacks cash to invest in its three Atlantic City casinos as rivals add hotel towers and shopping malls. A planned $400 million investment from Trump, who's also the casino company's chief executive, and a Credit Suisse First Boston unit fell apart in September after some bondholders balked at the terms.

"They've gotten a big step forward to having a viable company," said Andrew Susser, a debt analyst with Banc of America Securities in New York. "The fact that you have a support agreement with a significant number of holders signing on is an achievement."

Bondholders agreed to swap their debt for $74 million in cash, $395 million in common stock and $1.25 billion in new debt with an interest rate of 8.5 percent, the company said.

Donald Trump would retain his positions under the plan while his equity stake would be reduced to 27 percent from 56 percent, the company said. He would invest $71.4 million in the restructured company by converting $16.4 million of company bonds he owns into common stock and buying $55 million in equity with cash.

Trump's 11.25 Trump Atlantic City notes maturing in 2006 rose 1.5 cents on the dollar to 89 cents on the dollar according to a Bloomberg market average price. The bonds traded between 87 cents and 88.5 cents in August after the Credit Suisse deal was announced.

Trump's 11.625 percent notes maturing in 2010 traded at between 105.50 cents and 106.50 cents today, after trading yesterday at about 106.50 cents, traders said.

Holders of 57 percent of the company's $1.3 billion in Trump Atlantic City notes, 68 percent of the $425 million in Trump Casino Holding notes and 81 percent of the company's $65 million in Trump Casino Holdings second priority notes agreed to the plan, the company said. Trump Hotels now pays interest rates as high as 18.625 percent on some of its debt.

Typically, bondholders representing two-thirds of the dollar amount of debt have to agree on a bankruptcy reorganization plan for it to go a judge for approval without the risk of a court fight.

Trump said last month in announcing the failure of the Credit Suisse First Boston deal that he was considering privatizing the company. Trump first revealed plans to restructure the debt with Credit Suisse's DLJ Merchant Banking Partners III LP in February. Trump Hotels has reported annual net losses each year since its initial public offering in 1995.

The company said in August it would seek Chapter 11 bankruptcy protection as part of the proposed agreement and cut its debt by $544 million. Bond investors holding $425 million of the company's debt last month requested better terms than the 95.6 cents on the dollar the company offered, according to investors who did not want to be named.

Auditor Ernst & Young earlier this year raised doubts about the company's ability to survive because of its debt level. Trump Hotels owns the Trump Plaza, Taj Mahal and Marina in Atlantic City and a riverboat casino in Indiana, and manages an American Indian casino in California.

Shares of Trump Hotels rose 15 cents to 67 cents at 12:07 p.m. in over-the-counter trading. The stock had declined 76 percent this year.