He made millions in real estate, built a casino empire and conquered television with a “reality” show that turned “You’re fired” into a national catchphrase.
But Donald Trump’s glitzy, neon-trimmed casinos have busted. Now, they’re headed for Bankruptcy Court, a $400-million bailout and a new corporate structure in which he surrenders much of his control.
The roulette wheels will keep spinning and the nickel slots will keep eating coins at Trump Taj Mahal, Trump Plaza and Trump Marina, but parent corporation Trump Hotels & Casino Resorts Inc. may soon have new bosses calling the shots.
Under a plan announced late Monday, the company will file for Chapter 11 bankruptcy protection next month, emerging within a year. The deal is a “prepackaged” bankruptcy, one that has a plan in place at the start to revive a struggling company.
Saddled with $220 million in yearly interest payments and unable to generate enough cash to keep pace with newer, richer competitors, Trump Hotels will get a bailout from DLJ Merchant Banking Partners -- an arm of Credit Suisse First Boston -- aimed at reducing the company’s $1.8 billion in debt.
Trump, whose image shows up on billboards and sweepstakes come-ons all over Atlantic City, N.J., is worth an estimated $2.5 billion, according to Forbes magazine, which this year rated him among the 400 richest Americans.
Trump himself would contribute nearly $71 million, $55 million of which would be in the form of a co-investment with Credit Suisse and $15.9 million of which would come from his Trump Casino Holdings notes.
Trump would remain chairman but relinquish his chief executive title. And he would see his stake in his casino company shrink from 56% to 25%, with Credit Suisse owning more than two-thirds of the company.
The bankruptcy plan is expected to cut Trump Hotels’ debt by $544 million to $1.25 billion, drop the average interest rate on debts to less than 8% from about 12% and cut annual interest expenses by more than $110 million.
“I’m really happy about it. Even though it’s a small portion of my net worth, it’s an important company to me,” Trump said Tuesday.
It’s important to investors too. A majority of those holding $1.3 billion worth of bonds backed by Trump Taj Mahal and Trump Plaza have signed off on the plan, which calls for them to receive $282 million in cash, $851 million in new debt and $107 million in stock in the new company.
Those who own bonds backed by Trump Marina and Trump Indiana -- which operates a riverboat casino in Gary, Ind. -- have also been offered a combination of cash, stock and debt but have not yet agreed to the restructuring plan.
Credit Suisse First Boston, meanwhile, is betting its cash can help turn around Trump’s three Atlantic City casino-hotels and provide the financial resources to expand into other jurisdictions such as neighboring Pennsylvania, which recently approved slot-machine gambling.
Spokeswoman Victoria Harmon said Credit Suisse First Boston, a unit of Zurich, Switzerland-based Credit Suisse Group, was in the deal for the long term, at least five years.
Trump Hotels stock was suspended from trading by the New York Stock Exchange on Tuesday. The company’s stock traded as high as $34 in 1996 before beginning a long slide to less than $2 a share Monday.
If the deal goes through, it would be the second time Trump casinos have filed for Bankruptcy Court protection.
In 1992, Trump Taj Mahal, Trump Castle and Trump Plaza ended up in Chapter 11, burdened by more than $1 billion in debt and hurt by the 1990-91 recession.