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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (469)	12/6/2004 9:31:04 PM
From: who cares?	Read Replies (1) \| Respond to of 6370

By Maxwell Murphy A Dow Jones Newswires Column (This column was originally published Thursday.) NEW YORK (Dow Jones)--Even an apprentice investor knows common stock owners are last in the pecking order to divvy up a bankrupt company, but that's not stopping investors from bidding up Trump Hotels & Casino Resorts Inc.(DJTCQ). Trump Hotels & Casino, to file a pre-packaged Chapter 11 bankruptcy within the next couple of weeks, saw its shares rise sharply on Wednesday and Thursday, following news an equity investor wants a committee formed to represent shareholders. It's unclear what, if anything, shareholders can gain from this exercise. In any case, Trump stock is trading at an enormous premium to the valuation the company and its bondholders place on the recapitalized concern following reorganization. On Tuesday, the Delaware law firm The Bayard Firm filed a letter with the bankruptcy court seeking the committee on behalf of Robino Stortini Holdings LLC. Robino Stortini owns more than 1.1 million shares, some 3% of the existing company. The letter maintains stockholders weren't involved in formulating the bankruptcy plan and haven't had enough time to review it, putting them at a disadvantage to majority holder Donald J. Trump and company noteholders, who were fully represented in the process. Equity committees aren't the norm in bankruptcy proceedings, given the last-in-line claim stock can lay on a company's assets. However, they can occur in cases when material distributions to equity investors are likely, and where those holders couldn't adequately protect their interests otherwise. Counsel for Trump says it believes such a shareholder measure is "unnecessary and unfounded," given considerations already provided to equity investors. According to the reorganization plan, existing holders of the company's stock, other than Donald J. Trump himself, will see their nearly 45% ownership turn into a microscopic 5/100ths of 1%. The Donald will see his roughly 56% stake fall to around 26%, and bondholders will get most of the rest of the stock, plus cash and new debt, in exchange for their existing notes. When One Cent Really Isn't Just One Cent The consideration holders other than Donald Trump will receive consists of stock plus warrants to purchase shares of the new stock at his purchase price, which is 1.5 cents apiece. The warrants will cost a total of $50 million, and will translate into almost 8.3% of the fully diluted new company. Using unofficial calculations whose rough accuracy has been confirmed by Donald Trump, there will be anywhere between 36 billion and 40 billion shares outstanding following emergence from bankruptcy. There will be a reverse stock split following the reorganization, Trump has said, but its size hasn't been set. For each share of stock non-Trump holders currently own, they'll get a share of the new company and warrants to purchase about 167 more shares at the 1.5-cent price. Even at today's share price, up 25% at $1.20 each on the over-the-counter Bulletin Board at last glance, the average cost of a stake comes in at only around 2 cents per share, assuming warrants are exercised. Part of what's buoying the stock price is the idea that the new equity need only rise by a penny or two within a year to make for a profitable warrant exercise. However, a possible flaw in that logic: Each penny you want Trump stock to rise means tacking on almost $400 million in Wall Street value. The recapitalization plan already values the company in the $600 million neighborhood. If the stock were to go from 1.5 cents to even 3 cents, the new company's market cap would be around $1.2 billion. That approaches a mid-1996 all-time high for Trump Hotels & Casinos which, mind you, owns just three Atlantic City casinos and a riverboat casino in Indiana, plus manages a casino in California. Put another way, the new Trump would take on a valuation greater than every public U.S. casino company combined before it even hit $1 a share. Buying current Trump equity to get the warrants for the new stock is an intriguing - and risky - way to play a bankruptcy; it seems as safe a gamble as plunking a few dollars worth of nickels into a Trump slot machine. Donald Trump wasn't immediately available for an interview about the proposed equity committee. Neither The Bayard Firm nor Robino Stortini could promptly be reached for comment.