Trump Hotels expects to make debt payment

0 Comments | Oakland Tribune, May 29, 2004 | by Timothy L. O'Brien

NEW YORK -- Trump Hotels and Casino Resorts Inc. said Thursday that it made a crucial $73.1 million debt payment that was coming due over the weekend, giving the company a temporary respite from financial struggles that still threaten to force it into bankruptcy.

Trump Hotels, the centerpiece of Donald J. Trump's casino holdings, had to delay payment of the debt when it originally came due on May 1, requiring it to invoke a 30-day grace period.

Burdened with a $1.8 billion debt load and an inability to adequately maintain or expand its Atlantic City operations, Trump Hotels has been scrambling to restructure its debt and raise outside capital to help it resurrect its sagging fortunes.

One deal under consideration involves a $400 million cash infusion from a major investment bank, Credit Suisse, which would require Trump to sharply reduce his equity stake in the company and step aside as chief executive. Bondholders would also have to accept a reduction in the value of their debt holdings for the deal to go through.

Trump Hotels was required to use cash generated this month to meet the May debt payment, which means it will have a shorter time span to build up cash when the next $73.1 million payment is due in November.

Also, one person briefed on the financial position of Trump's two largest Atlantic City casinos, the Trump Taj Mahal and the Trump Plaza, said those casinos were entering the busy Memorial Day weekend with operating funds of about $20 million and $10 million, respectively -- perilously thin amounts given New Jersey regulations that insist on sufficient cash cushions at casinos and the possibility that lucky gamblers could snare an unforeseen windfall in coming days.

Scott C. Butera, executive vice president of Trump Hotels, declined to discuss the cash positions of the casinos, but said he was comfortable with their finances and was confident that the company would be able to meet its fall debt payment. "Obviously, the summer months are our best months, and we're optimistic about the November payment," said Butera, who added that negotiations with Trump Hotels' bondholders had been "active and constructive."

Earlier this month, Trump Hotels said it lost $48.8 million, or $1.63 a share, in the first quarter, compared with a loss of $24 million, or $1.09 a share, in the period a year earlier.

The possibility of a bankruptcy filing and a sell-off of shares of Trump Hotels has caused the company's total stock market value to be sliced by more than half over the last year. Trump Hotels has never been profitable since it became a public company in 1995.

While Trump Hotels is focused on debt payments going forward, the company's executives would prefer to restructure its debt as soon as possible to escape a cash squeeze. By making the debt payment on Thursday, Trump may have bought himself some additional time to work out the complex restructuring agreement with his bondholders and Credit Suisse.

Since the negotiations began in early April, bondholder representatives have been meeting with Trump Hotels' executives, including Butera, as well as Steven Rattner, the financier leading the Credit Suisse team.

Although there was some hope a deal could be reached by the end of May, analysts said that initial timetable was ambitious and that Trump might have used the interest payment as a goodwill gesture to appease bondholders through more protracted negotiations.

"He may have withheld the coupon payment to try to get guys in line," said Jane Pedreira, a bond analyst at Lehman Brothers who covers Trump Hotels. "So it signals to me that the dialogue is positive and progressing."

Nonetheless, getting all of the parties to agree will remain a complex process, especially given the deep distrust many bondholders retain toward Trump because of the contentious relationship he has had with them in recent years.

One bondholder voiced frustration on Thursday with the restructuring talks and said he hoped an outside takeover offer might be made for Trump Hotels.

"It would be the happiest day of my life if I could repossess his hotels and sell them to Carl Icahn," the bondholder said. "I would love to say, 'Mr. Trump, you've had your chance.'"