The truth is that The Donald, as the US real estate prima donna is capriciously referred to in the business and financial sector, the great ego machine that is Donald Trump still has not grasped the fact that in the gaming business you may change your name or your company’s name and operate under surrogate or pristinely new monikers, but if you cannot run a casino, then there are two doors open to you: either you go back to the business that gave you your billions or you lose your shirt, or more appropriately your investors’ shirts.

In the country of the fast buck and the junk bonds, there are still people captivated by the Trump ‘magic’, and have put their trust in his genius to get them out of the hole that he got them into in the first place. The main item in the latest Trump “Plan”, “which was confirmed on April 5, 2005, thereby marking the Company's formal emergence from the reorganization proceedings voluntarily commenced on November 21, 2004,” is to kick the debt, that got them into the Chapter 11 halfway house, from 2006 into 2015.

Now, the first item of the plan is the reduction of the debt from US$1.8 billion down to US$1.25 billion, which plainly speaking is 70 cents in the dollar, and which means a ten-year extension of the maturity of the Company's publicly-traded indebtedness. There is also “access to a $500 million Senior Credit Facility.” Basically, Trump has put some money to get back in the groove; the creditors have negotiated a further 10 years of interest revenue and saved two thirds of the principal; and “The Company has also changed its name to Trump Entertainment Resorts, Inc."(TER)

Now some people might say that this is chasing bad money. Indeed, some analysts cannot see how Trump can compete with Borgata Casino and the Tropicana in Atlantic City, where 3 of the 4 Trump casinos are sited. In particular because out of the US$500 million, which was deemed by the “Plan” for “funding for deferred capital expenditures and future expansions of the Company's properties”, US$150 million has already been assigned “to fund payments under the Plan.” No guesses as to who will collect some of this.

So the new Trump casino company limps into the future, with the hope of capitalizing on the Trump brand, which so far has served mainly to benefit Donald Trump. In the gaming business The Donald is a two-time loser. The Trump Taj Mahal casino declared bankruptcy in 1990, and Trump Hotels & Casino Resorts Inc. filed for Chapter 11 in November, facing $1.3 billion in bonds due to mature in 2006.

Respectable gaming industry analysts are looking at the Trump experience with trepidation. Joe Fath of Baltimore’s T. Price Rowe Group Inc. said: ''Borgata is a US$1.1 billion casino, and now they're (TER) putting another US$500 million into it when it probably needs more. Putting US$500 million on their properties is like putting on Band-Aids.'' Marc Falcone of Deutsche Bank said: ''It'll be very difficult for anybody to compete with the Borgata at this point.''

The fact though is that there is no US$500 million going into the Trump casinos for a much needed make over, which anyway would fall very short in comparison to the development of the other major companies. The Borgata is spending US$520 million on additional rooms, two nightclubs and restaurants, just for this one already impressive property.

The Donald has said that he will get a new CEO to run the company because of his other commitments. This is not a bad idea, as long as he gets the right person and lets them get on with the job of giving the investors a run for their money. The prospects, though, are slim, and next time it will be third time unlucky for the company’s investors. (E-05.23.05)

© Copyright 2005 CasinoCompendium



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