News for the Hospitality Executive
Trump Hotels Deal with Credit Suisse First Boston is Dead;
Donald Trump Claims Bondholders Will See a Happy Ending!
|By Lore Croghan, Daily News, New York
Knight Ridder/Tribune Business News
Sep. 24, 2004 -- Bank to Donald Trump: No deal.
The cash infusion from Credit Suisse First Boston that Trump had counted on to rescue his debt-burdened hotel and casino empire is dead.
Still, the self-styled greatest New York deal-maker vowed yesterday that there will be a happy ending for his casino company -- and his role in it, even if he has to dip into his own pocket.
The bank had agreed to invest $345 million in Atlantic City-based Trump Hotels & Casino Resorts and take a majority stake in the company.
The largest group of bondholders promised concessions, and a pre-arranged Chapter 11 was to be filed by the end of this month -- leaving Trump with a comfortable 25 percent stake in the company and an annual $2 million salary.
But all that ended Wednesday night at 10 o'clock, when Trump Hotels issued a single-paragraph bulletin saying the accord with Credit Suisse was off.
Some analysts called this a grave turn of events for the company, which is burdened with $1.8 billion in debt and has never turned a profit in its eight years as a publicly traded firm. The bondholders hold mortgages on the casinos. If they lose patience and turn on Trump, he could wind up in a hostile bankruptcy and lose the properties.
But Trump, himself is taking a cheerful attitude toward the setback.
Trump Hotels is back in talks with bondholders, trying to craft a new agreement. Also, Trump said he's considering taking the company private, though naysayers dismiss the move as extremely difficult to carry out.
"I have a lot of cash and I'm in a great business -- New York real estate," Trump told the Daily News. He underscored his commitment to Trump Hotels, though his current stake in the company makes up less than 1 percent of his net worth.
"It's an important company to me," he said. "It's going to become a large part of my net worth in the future."
Trump refused to dish about why the deal with Credit Suisse fell apart, and so did a spokeswoman for the bank. Trump Hotels' press release said it was terminated "by mutual agreement."
The silence surrounding the deal's failure will make other potential investors wary of stepping forward, one analyst said.
"It will make people wonder why Credit Suisse couldn't stay in bed with The Donald," said Marvin Roffman of money-management firm Roffman Miller Associates.
But it's entirely possible for Trump to go forward without money from an outside investor, said analyst Andrew Susser of Banc of America Securities.
Trump will have to get bondholders to agree to take less cash and more stock than they would have gotten in the Credit Suisse deal. But once funds are freed up to allow the company to grow, "the bondholders and Trump will be the ones to benefit, instead of Credit Suisse," Susser said.
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