July 25, 2004--It's a long way from Wall Street to Main Street.

And that may be a good thing for Donald Trump, whose Trump Hotels & Casino Resorts Inc. was selected Tuesday to operate the state's newest casino in French Lick.

The celebrity-businessman was the clear favorite on Main Street in the economically depressed southern Indiana town.

On Wall Street, however, $1.8 billion in high-interest debt has raised questions about the continued viability of Trump's company -- and the future role of Donald Trump himself.

Trump's star power and casino expertise were pitched last week as keys to drawing big-name celebrities and more than 1.2 million visitors a year to the remote French Lick area about 120 miles south of Indianapolis.

But his company has lost money every year since it went public in 1995 -- including more than $87 million in 2003 -- and the Trump allure does not appear to be a major draw at the company's other Indiana casino in Gary.

Still, gambling analysts said they don't expect the company's financial problems to affect the Orange County project -- although it is possible the casino could be in the hands of another company when it opens in early 2006.

"There shouldn't be a real concern," said Ed Feigenbaum, editor of Indiana Gaming Insight.

"The only difference might be that 'The Donald' would not be there personally."

The next few months will be telling for Trump, who did not respond to interview requests from The Star.

Trump officials say they are working on a refinancing deal with a unit of Credit Suisse First Boston that would bring an infusion of $400 million in exchange for Trump surrendering his majority ownership and CEO title.

If the plan wins approval from bondholders and regulators, Trump will remain chairman of the board and the company's figurehead.

Indiana Gaming Commission members were assured last week the deal is progressing and could be finalized within weeks -- but Trump representatives admitted it still isn't a sure bet.

"We have planned French Lick on this deal happening," said Robert Pickus, executive vice president of Trump Hotels & Casino Resorts.

Pickus said he expects creditors to agree to a potential loss in the refinancing because it's in their long-term interests to get at least some return on their investment. And, he added, the new money will be enough to turn around Trump's long-term losing trend.

"We have to take them at their word that their financial house will soon be in order," Gaming Commission member Ann Marie Bochnowski, of Munster, said before voting to award the contract to Trump.

Commission member Thomas F. Milcarek, of Michigan City, also voted for Trump but admitted he had concerns about the company's financial situation.

"Historically, Donald Trump has been counted down and out many times," Milcarek said, "and he's always bounced back."

Trump Hotels & Casino Resorts represents only a small portion of Trump's empire, with an estimated value of more than $1 billion, but it is the only one of his companies traded publicly.

In a 2003 year-end report, Trump's own auditors said the debt -- carried at interest rates of 11.25 percent to 17.62 percent -- raises "substantial doubts about the company's ability to continue as a going concern."

The company's interest expense alone in 2004 is projected to be nearly $100 million more than operating income. That creates a Catch-22 situation that in recent years has left Trump little money to reinvest in its aging flagship Atlantic City casinos, which, in turn, has cut into its profitability as a new casino came on-line and others were upgraded.

Of the five casino properties the company operates, only the Trump Indiana riverboat in Gary turned a profit last year.

One of the factors gaming commissioners were to consider in awarding the Orange County contract is whether an applicant has the financial ability "to operate a riverboat for the duration of the contract," according to state statute.

Chairman Donald R. Vowels, of Evansville, who voted to award the contract to Trump, said the company would not have made the final cut if it did not meet all statutory requirements.

Vowels said the overwhelming community support for Trump helped him balance concerns about Trump's financing. And, Vowels said, he believes it will take something like the Trump allure to attract gamblers to French Lick.

"People are going to have to have some reason to come here, and someone like Donald Trump can give them that reason," he said.

Despite what company and commission officials say about the appeal of the Trump name, in Indiana the company is not the state's biggest moneymaker -- and not the gambling mecca of northwest Indiana.

Trump is paired with the Majestic Star casino, featuring a common boarding area called Buffington Harbor -- turning these two riverboats into a unique gambling complex.

Trump attracts gamblers who don't bet as much. The high-rollers hit Horseshoe, the closest casino to Chicago.

For the five northwest Indiana riverboats, admissions at the Majestic Star/Trump complex lag behind those of Horseshoe and of Harrah's. Blue Chip, the farthest casino from Chicago, attracts the smallest crowd.

The Trump name alone certainly isn't a big draw in Gary.

"You could have named it Joe Doe Boat, and people would come," said Lake County Commissioner Rudy Clay. "They don't care who owns it. They just want to pull the slot machine lever."

In fact, gamblers who enter the Majestic Star/Trump complex usually don't have a preference on which boat to board, researchers at the Indiana University School of Public and Environmental Affairs found. Gamblers' decisions were based more on convenience, coupons, bus trip packages and the casino atmosphere.

Though the Trump casino makes less money for Indiana than many other riverboats, the casino also takes less money from gamblers. While Trump takes about $80 from each gambler, Horseshoe takes $92, according to data from reports filed with the Indiana Gaming Commission.

Trump has made good on its promises to Gary -- resulting in better roads, new firetrucks and new police cars. According to the 2001 report done on Trump by the university researchers, Trump had spent $155.8 million on the city of Gary -- $2.8 million more than it had promised.

But, Commissioner Clay said, the money doesn't always benefit local residents. For example, $56 million in casino money was spent on a 5,800-seat baseball stadium for the SouthShore RailCats. Local residents don't go, Clay said, while out-of-towners come in for the game and then leave, without spending any money outside the stadium. What's more, the city must spend $12,000 of taxpayer money at each game for security, he said.

"That was a losing deal for us," he said.

The riverboats certainly haven't been the magic potion that has transformed Clay's city, but he said Gary is better off with the riverboats than without.

But French Lick is a different market from Gary, which is located within a short drive of the metropolitan Chicago area.

Roger Gros, editor of Global Gaming Business magazine, said he likes Trump's plan to revive the area that was a hotbed of illegal gambling in the first half of the 20th century.

"He's got a great plan to make it a regional destination resort," said Gros, who follows Trump's business and financial situation.

"I believe it's another credible opportunity -- a profit center that may help them resolve their financial situation."

But not everyone is sure the project can justify the $108.5 million investment.

The two commission members who voted against awarding the contract to Trump said they had concerns about the company being able to live up to what it offered.

"I wonder if the proposal is too much," said Marya M. Rose, of Indianapolis.

Rose said she's not sure the company can deliver the 300,000 to 500,000 more visitors than projected by the two other bidders.

Member I. Maurice Ndukwu, of Chesterton, agreed.

"I don't think his name will draw that much," he said. "If the name is such a draw, you would think Gary would be ahead of the bunch."

Pickus, with Trump, said his company realizes that the residents of Orange County have high expectations for Trump and the casino.

"Whether we can meet everyone's expectations, I don't know," he said. "Casinos can only do so much, like provide jobs and tax revenue. But the boat will do everything we said it would."

By Tim Evans and Michele McNeil Solida

DETAILS OF THE DEAL

--Total initial investment: $108.5 million; future investment of $2 million in years 2-4 and $3 million annually thereafter.

--Design: Century-old paddlewheeler, French Renaissance style, including Indiana limestone and French Lick brick.

--Size: 38,397 square feet.

--Water feature: Three- to five-acre lake.

--Location: Adjacent to French Lick Springs Resort Hotel.

--Gaming: 1,000 slots, 30 table games, 12 poker tables.

--Other amenities: Five-story, 1,200-space parking garage designed to reflect style of area's two historic hotels; 30-seat deli; 250-seat, 24-hour buffet; 90-seat entertainment lounge; golf facilities connected with former U.S. Open and Masters champion Fuzzy Zoeller.

--Casino employment: 648.

--Annual wages: $18 million.

--Casino revenue: First year, $85.3 million; 5-year average, $95.5 million.

--Admissions: First year, 1.2 million; 5-year average, 1.4 million.

Infrastructure and incentives

--$5 million up front to local community, including $1.85 million for sewer improvements and $287,500 for Indiana Railway Museum; remainder spent as deemed by local community.

--One-time $5 million payments each to French Lick Springs Resort Hotel and West Baden Springs Hotel for mutually agreed renovations, including $1 million for upgrading Hills Golf Course at French Lick Springs.

--One-time $3 million payment to Historic Hotel Preservation Commission.

--Annual payments to local community of at least $1.25 million against additional percentage of adjusted gaming revenue.

Source: Trump Indiana Casino Management, LLC

TRUMP HOTELS & CASINO RESORTS

Atlantic City, N.J

--Trump Taj Mahal

Rooms/suites: 1,250

Casino square footage: 157,395

Slot machines: 4,670

Gaming tables: 193

Employees: 3,500

--Trump Plaza

Rooms/suites: 904

Casino square footage: 91,181

Slot machines: 2,906

Gaming tables: 90

Employees: 2,200

--Trump Marina

Rooms/suites: 728

Casino square footage: 79,700

Slot machines: 2,501

Gaming tables: 75

Employees: 2,000

Coachella, Calif.

--Trump 29

Rooms/suites: N/A**

Casino square footage: 80,000

Slot machines: 1,997

Gaming tables: 35

Employees: N/A*

Gary, Ind.

--Trump Indiana

Rooms/suites: 300

Casino square footage: 43,000

Slot machines: 1,662

Gaming tables: 42

Employees: 864

French Lick, Ind.

--Trump Casino Orange County (proposed)

Rooms/suites: N/A**

Casino square footage: 38,398

Slot machines: 1,000

Gaming tables: 30

Employees: 648

*Manages casino for Twenty-Nine Palms Band of Luiseno Mission Indians of California

**Lodging not owned/operated by THCR

Sources: SEC filing for 2003; Trump Indiana Casino Management, LLC

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