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Twentynine Palms Band of Mission Indians to Buy Out Trump Hotels Contract;

Will Relinquish Use of Trump 29 Casino Name

The Press-Enterprise, Riverside, Calif.
Knight Ridder/Tribune Business News

Jan. 3--The tribal owner of the Trump 29 Casino plans to buy out the management contract of Trump Hotels & Casino Resorts, which has overseen operations there since April 2002, and sever its ties to the legendary gaming company.

The Twentynine Palms Band of Mission Indians will also give up the rights to the Trump name, which it has used for multiple promotions over the years.

"They want to once and for all take it back and operate it like they did before, putting their own pride back into it," said tribal attorney Gary Kovall by phone. From 1994 to 2002, the tribe operated the Coachella casino as Spotlight 29.

Under the terms of its contract with Trump Hotels, the tribe has the right to buy out the management contract beginning in April 2005. Both sides agreed to accelerate the date by a few months, Kovall said.

The Twentynine Palms Band will pay Trump Hotels $6 million, said Scott Butera, executive vice president of the Atlantic City, N.J.-based casino firm.

"This is not the result of anything that was problematic between the tribe and us. It's just the right time for them to exist on their own," Butera said by phone.

Chairman and chief executive officer Donald Trump said in a statement: "We are proud of what we have done together with the tribe, starting with the financing and development of the property and culminating in the record-breaking results."

Trump Hotels is now focused on other issues, Butera said, namely a $1.8 billion debt load, which forced the company to file for bankruptcy in November.

In early December, a U.S. Bankruptcy Court judge approved a $100 million loan that will allow Trump Hotels to keep its casinos open.

The judge also will have to approve the deal with the Twentynine Palms Band, said Kovall. He said a hearing has been scheduled for January.

While there is a chance that the tribe could work out a licensing agreement to keep the Trump name, Kovall said it's unlikely. "A change and a new identity would take effect rather quickly after court approval," he said.

The buyout would enable the tribe to move ahead on plans it has had for some time to add a 190-room hotel and spa at the casino.

The tribal owners of the Fantasy Springs Casino in nearby Indio and the Morongo Casino, Resort and Spa in Cabazon both opened large hotels this month, upping the competitive ante in the Coachella Valley and surrounding areas.

"I think tribes are wise to do this. It is a move toward self-sufficiency," said William Thompson, a professor at the University of Nevada-Las Vegas. "Trump is a good name to have on a property, but they probably already have their clientele."

The Twentynine Palms Band is "certainly going to be in a more competitive market as their neighbors get bigger," he added. "And with the revenue they are saving from the management contract, they will be able to finance a nice hotel."

The tribe pays 30 percent of its annual "net revenues" to Trump Hotels on a monthly basis, according to SEC filings for Trump Casino Holdings.

That amounted to $6,161,000 for the first nine months of 2004, more than double what it made in the same time period last year, according to the firm's most recent quarterly report.

The total management fee for 2003 was $3.9 million.

While Tribal Chairman Dean Mike thanked Trump Hotels in a statement Tuesday "for their role in bringing our casino to its current operating level," the company warned its investors in September that the contract might be in trouble.

Last spring, the tribe's internal gaming commission "expressed certain concerns regarding the renewal of the Trump 29 Gaming License, which [Trump Hotels] believes are unfounded," reads a Securities and Exchange Commission document.

The loss of the contract would "adversely affect" the company's bottom line, the document continues.

On Tuesday, both Butera and Kovall said the concerns had nothing to do with the contract buyout. Neither one would discuss the details of the concerns.

Management contracts like this are regulated by the Indian Gaming Regulatory Act, which limits them to 30 percent of net revenues.

An early termination will have to be approved by the National Indian Gaming Commission.

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