Shareholders of Trump Hotels aim to file own plan

Jeff St. Onge

Wednesday, Feb. 9, 2005 | 9:13 a.m.

Shareholders in Donald Trump's bankrupt hotel and casino business asked a federal judge for permission to file a reorganization plan to rival a proposal being advanced by the company and its bondholders.

The shareholders said the company's plan benefits Trump at their expense. They asked U.S. Bankruptcy Judge Judith H. Wizmur to end Trump Hotels & Casino Resorts Inc.'s exclusive right to advance a recovery plan and allow the committee to explore offers that may give them more than the 1 for 1,000 stock split and one-year stock options they now stand to receive.

"Chairmen of public companies usually don't celebrate when millions of dollars in shareholder equity are being wiped out," a panel appointed to represent stockholders in the Trump Hotels bankruptcy said in papers filed Monday. "Donald Trump apparently does."

Trump Hotels, which owns four casino hotels, filed for bankruptcy in November after eight straight money-losing quarters left it struggling to cope with more than $1.8 billion in debt. The filing was the second casino bankruptcy for Trump, the real-estate developer who headlines NBC's television show "The Apprentice."

Scott Butera, president of Trump Hotels, couldn't be reached for comment. Robert Klyman and Charles Stanziale, lawyers for the company, also couldn't be reached for comment.

Companies that file to reorganize under Chapter 11 face a 120-day deadline for filing a plan to exit the process without the threat of competing proposals. While judges routinely extend the plan-filing deadline in large corporate bankruptcies, investors and creditors can win the right to file competing plans if they show good cause.

A hearing on the shareholder panel's request is scheduled for Feb. 23 in Camden, N.J., according to electronic court records.

Trump Hotels' proposed recovery plan gives Trump a 27 percent ownership stake in exchange for his personal investment of $55 million and a contribution of about $16.4 million in notes. He would get stock options worth as much as $10 million; a 25 percent stake in the Miss Universe pageant valued at $5 million; and the former World's Fair site in Atlantic City, worth an estimated $7.5 million.

Bondholders would swap their debt for about $78 million in cash, most of the stock in the revamped company and $1.25 billion in new notes. The plan estimates they would get back somewhere between 93 percent and all of what they are owed.

"In proposing the plan, Mr. Trump and the rest of management are not representing the interests of shareholders, but rather their own self interest," the panel's filing said. The company plan "must be subject to market testing in order to generate the greatest possible value for all parties in interest, and not just Mr. Trump."

A Justice Department official appointed the shareholder panel, headed by Michael Stortini of Robino Stortini Holdings LLC, on December 28.

Trump currently holds a 56 percent stake in Trump Hotels. The 27 percent stake he would keep under the plan is valued at $145 million.

The plan values the company's use of Trump's name and image at $124 million. Trump Hotels already has the right to use the name for the next 10 years, the shareholders' filing said.

Trump Hotels shares fell 12 cents to $1.53 in over-the- counter trading at 3:58 p.m. New York time.