Trump Hotels & Casino Resorts has agreed to pay $17.5 million to stockholders who complained they were being jilted by the casino company’s bankruptcy reorganization plan, the company announced Monday.
In addition to the cash payment, the Official Committee of Equity Security Holders — which represents about 20,000 holders of Trump Hotels shares — also would share in the proceeds from the sale of land that had been earmarked for Chairman Donald Trump under the company’s original Chapter 11 reorganization plan.
The settlement, which has the support of bondholders, eliminates a key obstacle to Trump Hotels’ bankruptcy reorganization. The plan, including the settlement, go before U.S. District Judge Judith Wizmur for confirmation April 5.
“We did the best job we could and we did it with no ulterior motives,” said retired beauty salon owner Philip Sternberg, 65, a member of the shareholders’ committee. “All the shareholders should thank God we fought for them.”
The committee had been a thorn in Trump’s side since the company filed for bankruptcy protection Nov. 21, criticizing the reorganization plan as a sweetheart deal for Trump that shortchanged investors.
In a Feb. 7 filing, the equity committee said the reorganization plan, if confirmed, would bestow “a basket of goodies” on Trump, including a $2 million-a-year salary, the granting of Trump Hotels’ 25 percent interest in the Miss Universe pageant to Trump and up to $100 million in personal real estate tax indemnifications.
The shareholders had asked Wizmur for the right to submit a competing reorganization proposal that they said would more fairly divvy up the assets of Trump Hotels, but she said no.
That set the stage for what was expected to be a bitterly contested confirmation hearing for the plan to pull the debt-ridden casino company out of bankruptcy.
“In the last three weeks, there’s been a lot of depositions,” said Steven Yoder, an attorney for the shareholders. “Both sides were building their ammunition for what could’ve been an expensive, protracted, ugly confirmation trial.”
But the settlement successfully quelled the shareholders’ revolt.
In addition to the $17.5 million, the committee’s members would share the revenue raised by the sale of the so-called World’s Fair parcel, a 3.4-acre site on the city’s Boardwalk where a Trump casino stood until it closed in 1999 and was later razed.
In exchange for giving up his rights to the land, Trump’s share of the reorganized company — which will be called Trump Entertainment Resorts Inc. — would increase to about 30 percent, instead of 26 percent under the original reorganization plan.
Altogether, holders of common stock would end up getting between $2 and $3 for each share they held, a big boost from the approximately half-cent per share contemplated under the original reorganization plan.
“I have a lawyer friend who told me once that a bad settlement is better than a good lawsuit,” said Michael Yaczyk, 54, a real estate agent who was among the shareholders. “I guess the reality is that a bird in the hand is worth two in the bush.”
Trump Hotels President Scott Butera said the settlement would help Trump’s reorganization plan win approval, but said it did not represent any admission by the company that the committee’s criticisms were valid.
“They were clearly looking out for the shareholders’ best interests. I understand where they were coming from,” said Butera, who said the reorganization plan now has overwhelming support heading into the confirmation hearing.