he deal, inked in May for us$ 316 million and discounted in October, was viewed by some analysts as overpriced for the Atlantic City, New Jersey, property, which Fields’ Coastal Marina LLC planned to refurbish into a Margaritaville casino resort.
Trump Entertainment’s lawsuit alleged that Fields had done improper deals with the Seminole Tribe of Florida to develop two Hard Rock casinos. Donald Trump had earlier hired Fields to help the company win development deals with the American Indian tribe. Bondholders, who may push Trump Entertainment into involuntary bankruptcy this week, would be stuck with all three casinos in the declining Atlantic City market should Trump’s unusually structured sale fall through.
“I strongly disagree with the bondholders’ decisions and actions,” Trump said in a phone interview yesterday. “Part of the reason that these bondholders can’t make a deal is they’ve lost so much money on other deals, they’ve lost so much money on this deal, and they’re probably going to lose so much money on other deals, that my impression is they don’t care.”
The lawsuit has been placed on hold pending closure of the sale in May, and will be dropped with prejudice should the deal be completed as disclosed, regulatory filings show. Fields may walk away from the deal because of Trump’s departure from the company’s board and the decline of Atlantic City gambling revenues, a person familiar with matter told Bloomberg News. Calls to Coastal Marina’s office weren’t returned yesterday.
Gambling revenue in the seaside resort city fell a record 7.6 % in 2008, the second straight annual decline as the recession deterred some gamblers, and slot-machine competition from nearby states wooed others. The decline continued in January, with revenue down 9.4 %.
Trump Marina is a 27-story hotel with a casino, theatre, nightclub, and spa on 14 acres in Atlantic City. Analysts including Fitch Ratings’ Michael Paladino, and Gimme Credit LLC’s Kimberly Noland have questioned the likelihood of the sale closing since the deal was first disclosed in May.
The lawsuit is referred to as “Power Plant Litigation” in Trump Entertainment regulatory filings, in reference to Power Plant Entertainment LLC, a collaboration between Coastal Marina and the Cordish Co. that built Hard Rock casino hotels in Hollywood and Tampa, Florida with the Seminoles after Fields left Trump.
Trump Entertainment’s TER Development is suing for fraud, breach of fiduciary duty, conspiracy, violation of the Florida Deceptive and Unfair Trade Practices Act and interference with prospective business relationship in the Circuit Court of the 17th Judicial District for Broward County, Florida, company filings show.
Donald Trump resigned from the board of debt-laden Trump Entertainment on February 13, saying he has nothing to do with the company anymore. Trump’s departure comes ahead of a February 17 deadline to make a us$ 53 million interest payment and after bondholders rejected his offer to buy the company.
The target has been extended four times since an initial grace period ended December 31. If an agreement can’t be reached over the weekend Trump Entertainment may file for Chapter 11 early next week, or the bondholders may force it into involuntary bankruptcy, a person familiar with the discussions said.
Trump controls 28 % of the stock, according to a March 21 regulatory filing. His daughter, Ivanka Trump, also quit the board, according to an e-mailed statement. Trump offered to buy the rest of the company and was turned down by bondholders, he said in an interview.
Tom Hickey, a spokesman for Trump Entertainment, CEO Mark Juliano and CFO John Burke didn’t return phone messages left February 13 and 14.
“Unless we’re going to be responsible for management it’s just not something that’s worthwhile,” Trump said in an interview last week. The Atlantic City, New Jersey-based casino operator said in December it needed to conserve cash and hold debt-restructuring talks with lenders.
Trump said the fate of Atlantic City’s Tropicana Casino Hotel and the under-construction Revel Entertainment LLC project factored into his decision to leave Trump Entertainment. “It’s a disaster and I see what’s happened with so many others, and I don’t want to be a part of it,” Trump said.
Tropicana Entertainment LLC was pushed into bankruptcy after being stripped of its New Jersey gambling license. State officials said in December 2007 that the Tropicana Casino Hotel’s service and cleanliness had declined and the property wasn’t being run according to state regulations.
Revel Entertainment last month suspended interior work, unable to secure needed financing to finish construction at the 20-acre boardwalk site. Revel had been scheduled to open mid- 2010.
Trump Entertainment’s three casinos have been through bankruptcy twice. Holders of most of company’s us$ 1.25 billion in notes and Beal Bank Nevada, which is owed us$ 490 million, have agreed not to exercise default rights for interest or principal payments until 9 a.m. New York time on February 17. The company’s market value has tumbled to us$ 7.3 million from its peak at us$ 842 million in August 2005.
Trump Entertainment’s 8.5 % notes due June 2015 traded at 14 cents on the dollar last Friday, according to Trace, the bond-pricing system of the Financial Industry Regulatory Authority.
Bondholder representatives “have made a series of bad decisions and encouraged wasteful spending, which has led to severe problems within the company,” Trump said in the statement. “The company is no longer operated to a standard consistent with other of my holdings.” Legal and consulting fees “will suck the blood from the company” as Atlantic City “tanks and competition from local markets grows,” he said.
Trump Entertainment emerged from bankruptcy 3 1/2 years ago. Its predecessor, Trump Hotels & Casino Resorts Inc., sought court protection in November 2004. It had lost money for nine years because of high interest payments that Trump claimed prevented the company from refurbishing and expanding its casinos.
The three casino resorts also went through bankruptcy in the 1990s. The company’s biggest bond investors include Franklin Mutual Advisers Inc., Northeast Investors Trust and Massachusetts Financial Services, according to data compiled by Bloomberg.
Representatives of bond investors Northeast Investors Trust, Putnam Investments LLC and the John Hancock High Yield Fund couldn’t be reached for comment after business hours. Bondholders hired Stroock & Stroock & Lavan LLP law firm to file the involuntary bankruptcy documents, the Wall Street Journal reported, citing unidentified people familiar with the matter. Trump Entertainment hired law firm Weil Gotshal & Manges LLP as bankruptcy counsel.