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Icahn Trumped in Fight for Three Atlantic City Casinos

Federal Bankruptcy Judge Rules in Favor of Bondholder Proposal


April 13, 2010 - Developer Donald J. Trump and Trump Entertainment Resorts Inc. will maintain control of the three Atlantic City casinos that bear his famous name.

U.S. Bankruptcy Judge Judith Wizmur ruled Monday in favor of a proposal by the bondholders and the company to bring it out of bankruptcy a third time.

The decision represented a major defeat for billionaire financier Carl Icahn, who had waged a bid to take over the company since December.

"We were hoping for this," an elated Trump said by phone Monday from his New York office, minutes after the 121-page ruling came down at 5:45 p.m. He took the call with daughter Ivanka Trump at his side.

"It's a great victory for Atlantic City, for New Jersey, and all of the people of the state. And it's a great loss for Carl Icahn," he said.

Icahn manages Icahn Partners L.P., a hedge fund out of New York, and oversees an empire estimated by Forbes Magazine to be worth $9 billion. He was not immediately available for comment Monday night.

At stake in the struggle between the financial titans was the fate of the three aging Trump casinos, which, like much of Atlantic City, are slumping because of the economy and competition from Pennsylvania slots parlors.

Central to each side's argument during 21/2 weeks of testimony last month in a Camden courtroom was the value of the Trump brand, and whether the three casinos could survive without it.

Acknowledging the Trump casinos' difficulties in making mortgage-interest payments as revenues have tumbled in the last few years, Wizmur ruled that their continued use of the Trump name - which an Icahn takeover could not guarantee - was critical.

It was compelling enough, Wizmur reasoned, to override the fact that the Icahn plan would have left the company completely debt-free.

"While certain aspects of the new agreement are less favorable to the debtors than the original agreements," she wrote, "the perpetual, royalty-free license of the continued use of the name and likeness of Donald Trump, the newly established right to use the name and likeness of Ivanka Trump, and the restrictive covenant imposed on the Trump parties to prohibit the use of the Trump brand in connection with casino or gaming activities in New Jersey and six adjacent states all tilt the balance in favor of approving the settlement as being in the paramount interest of the reorganized debtors."

The majority of bondholders also favored this plan over the plan presented by Icahn and his partners.

Last month, the two sides offered differing pictures of the casino company and where they planned to take it.

Trump attorneys portrayed Icahn as an opportunist who had neither a strategic vision for the casinos nor the support of the note holders, the majority of whom voted for the bondholders/company plan. The Trump plan, they argued, would inject $225 million in equity into the company and guarantee continued use of the Trump name on the casinos.

Icahn's legal team, meanwhile, sought to make the casino company's finances, or lack thereof, the central point of its argument that his plan, with Icahn's vast resources, presented the Trump casinos their best chance to grow and prosper.

The plan offered by Icahn would have provided $486 million to pay off first-lien notes in exchange for 100 percent equity in the firm, and would have completely deleveraged it.

In December, Icahn initiated a takeover of Trump Entertainment by purchasing 51 percent of the company's $486 million mortgage and aligning with banker Andy Beal, who had severed ties with Trump.

In early March, the stars appeared to be lining up in Icahn's favor - the New Jersey Casino Control Commission gave final approval to the $200 million sale of the Tropicana on the Boardwalk to an investors group led by Icahn and authorized him to take over ownership and control.

On April 2, Icahn purchased the remaining 49 percent of the Trump company.

On Monday night, Mark Juliano, Trump Entertainment's CEO, expressed satisfaction that things had gone the other way.

"We now have a company with a great capital structure and use of the Trump name, which is really important to all of our Atlantic City operations," Juliano said. "We're really looking forward to working with our new owners, stabilizing our operations here in Atlantic City, and moving forward and getting back to business."

That will likely include divesting the company's weakest casino, Trump Marina, which is located next to the market-leading Borgata. A deal to sell the troubled gambling hall fell apart just over a year ago, and Juliano testified during the bankruptcy case that selling it remained a priority.

Control of Trump Entertainment will now be handled by a committee of several hedge funds, led primarily by Avenue Capital Group under chairman and CEO Marc Lasry.

"The compelling part of [Icahn's] plan was debt-free conversion, but that was not the only thing to consider," Juliano said. "The guaranteed use of the Trump name moving forward and a greater infusion of capital moving forward were also factors. Obviously, the judge agreed with us."

For Donald Trump, who's been a fixture in Atlantic City since the debut of Trump Plaza Hotel Casino in May 1984, the decision was validation of what he has trumpeted all along: that his name and brand were worth millions.

Last month, he filed a petition with the bankruptcy court claiming the Trump name was worth an estimated $40 million for the three casinos.

"I'm very appreciative," said Trump, who appeared in court Feb. 25 to try to convince Wizmur that Icahn would put little money back into the casinos. "Carl Icahn wanted the name very badly, but he would have had to make a deal with me. It's going to end up a very fine company."

Under the plan approved by Wizmur, Trump will own 5 percent of the company, with the right to purchase an additional 5 percent.

The plan must still be approved by New Jersey casino regulators, a process expected to take about 90 days.

Trump Entertainment, which applied for one of two licenses to build a casino in Philadelphia, is currently suing the Pennsylvania Gaming Control Board for awarding a license to Foxwoods. Last week, Las Vegas casino magnate Steve Wynn announced he was dropping out of that project.

Trump spokesman Tom Hickey said Monday night that the lawsuit against the gaming board is still pending in federal court.




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