Trump Hotels Secures $500-Million Loan but Faces Shareholder Lawsuit
Trump Hotels & Casino Resorts Inc. said in a regulatory filing Thursday that it had arranged $500 million in financing for when it emerges from Chapter 11 bankruptcy.
The news comes one day after a shareholder filed a lawsuit against billionaire Donald Trump and four other directors over the company’s proposed plan to exit bankruptcy, saying it unfairly favors him as majority holder.
The casino operator, which filed for bankruptcy protection last month, said Thursday that Morgan Stanley Senior Funding Inc., UBS Loan Financing and UBS Securities had committed to the working capital loan.
Last week, a New Jersey bankruptcy judge gave interim approval to a $100-million credit line from Beal Bank under which the company could continue operations.
Shareholders, however, have until Monday to file requests with the U.S. Trustee to form an official committee of equity holders to object to the plan.
Under the restructuring -- negotiated with bondholders before the casino operator filed for Chapter 11 bankruptcy protection last month -- bondholders will own about two-thirds of the company and Donald Trump’s stake would shrink to about 27% from 56%. The real estate magnate would remain chairman and chief executive.
In the lawsuit filed Wednesday in Delaware Chancery Court in Wilmington, investor Ariel Holdings said the bankruptcy plan served Trump’s “personal interests” and violated the board’s duties to shareholders. Ariel asked the court for unspecified fees and damages and to order Trump and other directors to act independently to protect the interests of all shareholders.
“Seizing upon the dire straits the company was placed in by virtue of his own mismanagement, under the subterfuge of a prepackaged bankruptcy plan, Trump has trampled upon the rights” of shareholders, “diluting their interests to almost nothing, while shifting additional assets, compensation and equity into his own pocket,” Ariel said in the suit. Ariel owns more than 100,000 shares of Trump Hotels.
The suit says the plan would dilute shareholders’ current 44% stake to 0.05%.
Trump Hotels President Scott Butera didn’t respond to messages seeking comments.
Ariel, which is seeking to represent other shareholders, also asked the court to force the directors to ensure that there are no conflicts of interest between Trump and other shareholders.
Trump Hotels would be able to exit bankruptcy in March if creditors and the court approve the plan.
Shares of the company rose 13 cents to $1.89 in over-the-counter trading.
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Bloomberg News and Reuters were used in compiling this report.
