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Trump Casino Co. Emerges From Chapter 11

05.20.2005, 05:55 PM

With a new name, a big bankroll and a challenge as big as you-know-who's ego, Donald Trump's casino company emerged from bankruptcy protection Friday.

The casinos, which remained open throughout the Chapter 11 filing by Trump Hotels & Casino Resorts, now face the task of winning back gamblers who took their coin cups and wallets to rival casinos that added hotel rooms, retail developments and other attractions while Trump barely had two $5 chips to rub together.

Lawyers for the company and its bondholders put the finishing touches on a recapitalization that reduces the company's interest payments by $102 million a year, frees up money for improvements and gives Trump another chance in the hotly competitive Atlantic City casino market.

"It's been an amazingly positive process," Trump said Friday. "I was able to cut the amount of debt, cut the amount of interest being paid, and overnight change the structure of the company."

Trump Hotels & Casino Resorts, which operates three casinos here and one in Gary, Ind., filed for Chapter 11 on Nov. 21, suffocated by $1.8 billion in debt that rendered it too cash-poor to maintain, spruce up or expand its gambling halls at a time when its competitors were polishing their offerings.

Under the restructuring, the company's debt was reduced to $1.25 billion.

It was the second time through bankruptcy court for the casino company.

As part of a pre-packaged bankruptcy reorganization, Trump agreed to turn over majority control to his bondholders while still remaining the single-largest individual stockholder.

The real estate titan behind the success of TV's "The Apprentice" didn't get fired: He's still its $2 million-a-year chairman and public face, but he now has a new board of directors dominated by people chosen by bondholders.

The company's old name did get axed, though. Now, it's Trump Entertainment Resorts Inc. - "casino" has been cut out, a reflection of the company's bid to broaden the appeal of its properties beyond blackjack tables and slot machines.

"The Trump brand has never been better," said company President Scott Butera. "We still have good locations. It's just a matter of getting the product in line. For us, it's ensuring we execute our plan and renovate our properties in a way that's appealing and so we're able to recapture what we've lost to some of the other operators."

Chief among them is Borgata, a $1.1 billion casino opened by Boyd Gaming Corp. in 2003 whose luxurious accents, edgy attitude and sheer novelty - it was the first all-new casino to open in Atlantic City in 13 years - have blown away the competition, hurting Trump's casinos in the process.

The bankroll comes in the form of cash flow generated by the reduced interest payments, $100 million in new financing and a $500 million line of credit.

Already, the company is renovating rooms at Trump Plaza Hotel & Casino and Trump Marina and re-doing the casino floor at the Plaza. "Our customer base will notice an improved facility," said Paul Ryan, executive vice president of hotel and food and beverage operations.

Trump also is drawing up plans for a new 1,400-room hotel tower at Trump Taj Mahal Casino Resort, hoping to gain ground lost to Borgata, Tropicana, Harrah's Atlantic City and others that used the addition of hotel rooms - gamblers who stay overnight spend more in casinos - to ramp up revenues and lure away some of Trump's customers.

"They've certainly got a strong brand name, a strong customer base and an experienced management team," said Michael Pollock, managing director of Spectrum Gaming Group, a casino consultant.

"What they're missing is more hotel rooms. Without exception, every Atlantic City property that has added quality rooms in the past decade has seen a very high return on investment. Rooms are the most effective way of rewarding your loyal customers. Secondly, they allow you to reach markets you otherwise may not be getting."

The company also is mulling a venture in neighboring Pennsylvania, where slot machine gambling was legalized last year but has yet to begin.

But there were no champagne corks popping, no sign changes atop the casinos, no other visible indications of Friday's milestone in Atlantic City. Instead, there was a sense of relief that the restructuring - plans for which began two years ago - was finally over.

"I have a lot of catching up to do," said Mark Brown, Trump's top casino executive.

Butera said the company's advertising and promotions would focus on the company's offerings, with no explicit references to the bankruptcy or the company's successful emergence from it.

"Probably the biggest challenge the company faces is Trump himself," said analyst Sean Egan, of Egan-Jones, an independent credit-rating service in Haverford, Pa. "He happens to be a great promoter, a mediocre manager and a miserable financial custodian."

Source: Forbes