Trump Hotels and Casino Resorts, Donald Trump's troubled casino business, is to file for Chapter 11 bankruptcy protection after reaching agreement with bondholders to recapitalize debt.
The plan will significantly ease Trump Hotel's $1.8 billion in bond debt and appears to end months of protracted negotiations between bondholders, financiers and the company. The plan calls for about $400 million in debt reduction with a reduced interest rate of 8.5 percent, representing savings in annual interest of $98 million.
The company will also have a $500 million credit line secured by a lien on the company's assets.
Mr. Trump said: “We now have the capacity to significantly expand the Trump brand into the ever-evolving gaming industry. I anticipate THCR achieving the same level of success as my other business and real estate endeavors.”
Trump Hotels announced in August that it would seek bankruptcy protection in connection with a refinancing plan with DLJ, the private equity arm of CSFB. However, that deal fell through in September, along with a crucial $400 million cash infusion from DLJ.
With the lifeline from DLJ no longer available, Mr. Trump said he would meet bondholders for another round of talks and that he was also considering privatizing the company.
Scott Butera, vice-president, said Trump Hotels would take the new pre-negotiated plan to bankruptcy court in late November. The company expects to emerge from Chapter 11 in 60-90 days.
The agreement has been approved by a majority of bondholders, some of whom had balked at previous plans that would have entailed swapping some of their bonds for equity, or for debt with a lower market value.
When asked why bondholders had finally come to an agreement, Mr. Butera said they “saw how good this company was” and that they were “excited about teaming up with Mr. Trump.”
Mr. Trump will remain the company's chairman and chief executive and will invest $71.4 million into the recapitalized company. He will still be the largest individual shareholder of Trump Hotels with a 27 percent stake.
Under terms of the agreement, holders of Trump Atlantic City and Trump Casino Holdings notes would exchange their $1.8 billion in debt for about $74 million in cash, $395 million of common stock and $1.25 billion in new debt with an interest rate of 8.5 percent and a 10-year maturity.
Trump Hotels said it expected the recapitalization to fund renovation and expansion of its properties, which include the Trump Taj Mahal, Trump Plaza and Trump Marina in Atlantic City, New Jersey, as well as possible development in other markets.