Trump Entertainment Brand Seen Unscathed By Ch. 11
18 2월 2009 - 4:55AM
Dow Jones News
Although real estate mogul and reality TV star Donald Trump has
parted ways with Trump Entertainment Resorts Inc. (TRMP), the
casinos bearing his name shouldn't be immediately hit by the
company's Chapter 11 filing.
Trump Entertainment made its third visit to bankruptcy court
Tuesday, capping off months of negotiations with major creditors
after the company missed a $53 million interest payment in
December. Trump, founder of the company, resigned as chairman of
the board Friday. And, Chief Executive Mark Juliano said Tuesday's
filling won't have an immediate change in the daily operations of
the company's three Atlantic City casinos. "The bankruptcy will not
injure the brand at all," said Roger Gros, publisher of Global
Gaming Business, a trade magazine. "They have to be careful in how
they get the message out to the players and employees."
However, observers said there is some question whether the
filing would impact the sale of Trump Marina Hotel Casino to
Coastal Marina LLC, an affiliate of Coastal Development LLC.
"Coastal Marina is closely monitoring news and events in Atlantic
City and needs to fully evaluate the developing situation and its
effects on Coastal Marina's interests," said Coastal in an emailed
statement.
Tom Hickey, a Trump Entertainment spokesman, said the Chapter 11
filing is unrelated to the sale of the Marina. "We have no reason
to believe that any facts regarding the transaction have changed,"
he said.
Trump Entertainment hasn't heard from Coastal Marina regarding
the deal, which is expected to close by the end of May.
Wall Street has been increasingly skeptical that Trump
Entertainment will actually close the sale with Coastal Marina
given there's no obvious financing for the venture at a time of a
crippling credit crunch. Ahead of Tuesday's filing, analysts
thought Trump Entertainment would struggle to survive as a going
concern if the deal fell through.
Trump Entertainment, which emerged from bankruptcy for the
second time in 2005, has been down on its luck for quite some time
and a restructuring of some form was highly telegraphed by Wall
Street. Saddled by heavy debt, fierce regional competition and a
challenged Atlantic City market made it a losing bet for many
investors. As such, the company's stock price has declined about
96% over the last 12 months. With all three of its assets in
Atlantic City, Trump Entertainment has to invest tons of money to
keep up with competitors that are striving to reinvent the gambling
haven as a Las Vegas of the East.
For instance, the Borgata Hotel Casino & Spa, co-owned by
Boyd Gaming Corp. (BYD) and MGM Mirage (MGM), has become the gold
standard for new projects in Atlantic City. Trump Entertainment's
challenge comes at a time when all 11 casinos in the area are in
dire straits in terms of expanding and building new properties and
attracting gamblers. "They are still behind in terms of their
ability to spend to keep their properties looking their best and
they probably don't have as much marketing dollars," said Dennis
Forst, an analyst at KeyBanc Capital Markets. Barbara Cappaert, an
analyst at KDP Investment Advisors, Inc., said Trump's departure as
chairman probably won't be the last time the company hears from
him. She noted in a report that Trump announced that he would
"vigorously" defend any contracts bearing his name.
"We take this specifically to mean not only the consulting
contract but also the naming rights," Cappaert wrote.
Hickey said Trump Entertainment "does and continues to own the
rights to the Trump name for gaming purposes."
In 2008, the Trump casinos had the biggest revenue drain of the
11 gambling operators in Atlantic City as the island town suffered
a 7.6% decline in casino revenues last year, according to the New
Jersey Casino Control Commission.
However, Trump's Taj Mahal, which recently added a new luxury
tower, posted a revenue increase of nearly 10% in January, compared
with a year earlier.
-By A.D. Pruitt, Dow Jones Newswires, 201-938-2269,
angela.pruitt@dowjones.com