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U.S. Bankruptcy Court Judge to Deliberate Competing Plans for
Trump Entertainment Resorts Inc. Emergence From Bankruptcy


In Opposing Corners Stand Trump and Icahn; One Hates to Lose the Other Loves a Bargain

By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

Feb. 19, 2010--ATLANTIC CITY -- U.S. Bankruptcy Court Judge Judith Wizmur will begin deliberations Tuesday in Camden to determine the fate of Atlantic City's three financially troubled Trump casinos.

Wizmur will select from competing plans for Trump Entertainment Resorts Inc. to emerge from bankruptcy: one plan devised by bondholders, the company, and Trump; the other by billionaire financier Carl Icahn.

Earlier this week, Wizmur ruled that Donald Trump and his daughter Ivanka could vote on Icahn's buyout plan of the flagship Trump Taj Mahal, Trump Plaza, and Trump Marina. Father and daughter resigned from Trump Entertainment's board of directors last year, just days before the company declared bankruptcy for the third time.

In that ruling, Wizmur said the Trumps were major creditors and had filed more than $100 million in claims for the use of their names and images.

The outcome of the deliberations could radically alter the balance of power in Atlantic City. Icahn could emerge as owner of four of the 11 casinos here, the same number as Harrah's Entertainment Inc., currently the biggest player.

At the center of each plan for the Trump casinos is a financial titan: One hates to lose, the other loves a bargain.

In one corner is Donald Trump, the son of a Brooklyn developer, who took on Manhattan in the mid-1970s, borrowed heavily, closed deals, became a billionaire, and nearly lost it all when real estate crashed in 1990. His net worth is $1.6 billion, according to Forbes magazine, and he is known for having his name emblazoned on luxurious condo hotels and golf courses and being paid handsomely for it.

In the other corner is Icahn, ranked 43d among the world's richest billionaires by Forbes, with a net worth of about $9 billion. He cashed in on the 1980s' leveraged-buyouts craze and runs Icahn Enterprises L.P., a holding company consisting of real estate and hedge funds.

Icahn has a reputation for buying casinos and other companies in distress, often with bankrupt next to their names. His most recent conquest: the Fountainbleau Casino Resort in Las Vegas, which he seized in Bankruptcy Court last year.

An Icahn-led investors group took control of the Tropicana on the Boardwalk last summer for $200 million in a bankruptcy auction.

Trump Entertainment filed for bankruptcy Feb. 17, 2009.

Donald Trump and Trump Entertainment originally aligned against the bondholders with Beal Bank Nevada and a Trump friend, Andy Beal. That alliance fractured in the fall, and Trump joined the bondholders and the company against Beal Bank.

Currently, Trump Entertainment and the bondholders are offering $225 million for the company, which would give bondholders 70 percent equity. About 5 percent of the firm would go to Trump himself, with rights to buy up to an additional 5 percent.

Trump reiterated yesterday that he was with the bondholders and the company, but he declined to comment further.

Under the rival plan, Icahn Partners L.P., a hedge fund, would offer $484 million to pay off first-lien notes in exchange for 100 percent equity in the company. An additional $125 million would go for general expenditures, and $1.25 billion in debt would be eliminated. The plan, announced Dec. 11, was negotiated by Beal Bank.

Each side is expected to submit to Wizmur by 2 p.m. today a final memorandum on why its plan is better.

"The bondholder plan leaves the company with less debt than it has now," Mark Juliano, Trump Entertainment chief executive officer, said last week. "It still reduces debt significantly and represents a better strategic plan moving forward for the company."

Icahn, in a phone interview this week from his New York office, disagreed. "They have all of this debt on the company. I don't understand their logic. It's the bondholders' getting a home run out of this.

"The Icahn plan completely deleverages the company," he said. "It's good for the company, employees, and the [Trump] casinos because the company will have the capital it needs to grow and prosper in Atlantic City, which is a very tough market right now."

If their plan prevails, Juliano said, the Trump brand stays -- including the Trump name on the casinos. Icahn said that would depend on a new CEO and how much Trump would have to be paid.

With Icahn, Juliano said, Atlantic City would get someone who targets casinos in trouble and sells them at a profit with little attachment.

Case in point: In 1998, the Sands Hotel Casino on the Boardwalk filed for bankruptcy. Two years later, Icahn bought it for $65 million. He sold it and nearby beachfront property for $275 million in 2006, a 323 percent profit. (The Sands was imploded in October 2007.)

"It's certainly at the forefront of the minds of many [Trump] employees," Juliano said. "[Icahn's] investment record would not speak to a plan of growth."

Icahn sees it differently. Timing is everything, he said, and he buys troubled properties that no one else wants, cleans them up, and hires new management to run them.

"You buy the best things when no one else wants them," Icahn said. "It looks like a bargain, but you are taking a risk . . . and there is a good potential for profits."

Icahn brushed aside an assertion that he and Harrah's Entertainment would control too much of the industry here.

"Atlantic City, in a strange way, needs more concentration," he said. "There are not enough strong players right now."

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Titans' Strategies

Bondholders/Trump Entertainment Resorts plan

A rights offering for $225 million available to all bond- holders for a total of 70 percent of company ownership.

Of that, $125 million would be earmarked to pay down credit facility or first-lien debts. (On a valuation of the company at $459 million, total indebtedness would be $334 million.) The remaining $100 million would go for general purposes, capital expenditures, and improvements.

The ad hoc committee would get 20 percent company ownership, with 5 percent going to 100 percent of the original bondholders.

Five percent of the company would go to Donald Trump, with rights to buy up to an additional 5 percent.

Icahn Partners plan

One hundred percent equity would go to Icahn Partners, a hedge fund, in exchange for about $484 million in first-lien notes. Icahn Partners would absorb the entire $484 million in debt in exchange for equity.

In addition, Icahn Partners would inject $125 million in cash to be converted into equity on the effective date of the Icahn reorganization plan. That money would be a combination of a $45 million debtor-in-possession loan and $80 million in cash.

All company debt eliminated.

- Suzette Parmley

Contact staff writer Suzette Parmley at 215-854-2594 or sparmley@phillynews.com.

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Copyright (c) 2010, The Philadelphia Inquirer

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