With loan approved, confirmation dates set, Trump case moves on

John Curran

Friday, Feb. 4, 2005 | 9:36 a.m.

CAMDEN, N.J. -- A judge dealt another favorable hand to Trump Hotels & Casino Resorts on Thursday, giving final approval to a $100 million "debtor in possession" loan and setting a date for a confirmation hearing that would formally end the company's Chapter 11 case.

Fending off objections from shareholders, U.S. Bankruptcy Judge Judith Wizmur approved the loan by Dallas-based Beal Bank, without which Donald Trump's three Atlantic City casinos would have had to shut down for lack of cash, according to Trump lawyers.

The money, $36 million of which has already been drawn down by the company, is paying salaries, vendors and other operating expenses as Trump Hotels moves toward the confirmation hearing scheduled to begin March 29.

After months of negotiations with bondholders, Trump Hotels filed for bankruptcy court protection Nov. 21 with a prepackaged plan that calls for the bondholders to take control of the company but Trump to stay on as chairman and CEO.

His stake would drop to about 26 percent, while bondholders would control two-thirds of the equity in the reorganized company.

Trump's casino company plans to build and operate a casino in southern Indiana's Orange County.

Company officials say the reorganization will not hinder the Indiana casino project. The company has operated a riverboat casino on the shores of Lake Michigan in Gary for several years.

Under the plan, Trump Hotels would substantially reduce its $1.8 billion debt and then use $500 million in new financing -- together with about $98 million in annual interest payment savings -- to begin sprucing up its properties, starting with a new tower at Trump Taj Mahal Casino Resort.

In court Thursday, financial adviser J. Soren Reynertson testified that Trump's casinos have steadily lost market share because the debt-laden company has put off capital expenditures for upkeep and expansions that would have helped it keep pace with competitors.

If the company's plan for reorganization is approved, Trump Hotels would spend $166 million on upgrades and maintenance in 2005 alone, he said.

The reorganization still faces hurdles.

An equity committee made up of Trump Hotels shareholders is fighting the reorganization, saying its terms would unjustly enrich Trump and decrease shareholders' chances of recovering money from their investments.

An amended version of the reorganization plan, filed Tuesday, calls for Trump to get up to $100 million in tax indemnification. According to the provision, Trump has final say if the company wants to sell any of the casinos.

If he waives his right to veto a sale and it leads to personal tax liabilities for him, the company would pay the taxes for him.

In addition, the plan would boost Trump's salary to $2 million, from the $1.5 million he made last year. "That's a $500,000 raise for the great job he's done running the company," lawyer Van C. Durrer II told the judge sarcastically.

Durrer represents DLJ Merchant Banking Partners III, which filed a new $26 million claim against Trump Hotels last week. DLJ, an arm of investment bank Credit Suisse First Boston, says Trump owes a $25 million "breakup fee" for a bailout the companies negotiated -- unsuccessfully -- last summer.