Trump's casinos to file for bankruptcy
By William Spain, CBS.MarketWatch.com
Last Update: 10:32 AM ET Aug. 10, 2004
CHICAGO (CBS.MW) -- In what it termed a "recapitalization," teetering Trump Hotels and Casino Resorts said that it will declare bankruptcy in order to restructure its huge debts -- and get a $400 million cash infusion -- while its eponymous chief will cut his stake and be shown the door.
Late Monday, Trump (DJT: news, chart, profile) said that bondholders had agreed to the plan laid out by the company and a private equity arm of Credit Suisse First Boston. About $400 million of equity will be invested into the new company with Donald Trump's portion to be $70.9 million, $55 million of which would be in the form of a co-investment with CSFB. When all is said and done, he will own just 25 percent of the company and while still serving as chairman, will no longer have any executive duties.
Trump won't even own his name: He will surrender the rights to use it and his likeness for gambling-related activities to the company -- royalty-free and in perpetuity.
The plan is designed to chop down the company's $1.8 billion in debt to $1.25 billion while the company's average interest rate -- negotiated by its soon-to-be former chief executive -- will drop from 12 percent to just under 8 percent. That will shave about $110 million off its annual cash interest expense and perhaps help the company to make long-needed capital investments in its increasingly run-down properties.
The company, shaky for years, has come under even more pressure recently with stepped-up competition in Atlantic City. Last year, MGM Mirage (MGG: news, chart, profile) and Boyd Gaming (BYD: news, chart, profile) opened the Borgata, a $1.2 billion Las Vegas-style behemoth that has sucked up much of the New Jersey resort's high-end business.
The New York Stock Exchange suspended trading in shares of Trump early Tuesday. It closed unchanged at $1.90 on Monday.
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