Trump casinos explore sale

By DONALD WITTKOWSKI
Published: Saturday, March 10, 2007

ATLANTIC CITY — Donald Trump may be putting a “For Sale" sign on his three casinos.

Trump Entertainment Resorts Inc. has hired a financial adviser to explore the possible sale of all its holdings, one of the casinos or a refinancing deal for the money-losing company.

“In general, the company has always been open to talking with banks about financial opportunities," said James B. Perry, president and chief executive officer of Trump Entertainment.

Perry declined further comment Friday other than to say that the company will issue a news release Monday detailing its plans.

Trump reportedly has retained Wall Street investment firm Merrill Lynch to help it evaluate its options. Trump may pursue a sale at a time when the casino industry is experiencing record buyouts led by the pending $17.1 billion takeover of Harrah's Entertainment Inc. by private equity firms Apollo Management and Texas Pacific Group.

Joel H. Simkins, a casino analyst for Prudential Equity Group, said private equity firms may be a likely suitor for Trump because of the company's high debt load. Other candidates may include the publicly traded casino companies Pinnacle Entertainment Inc., Ameristar Casinos Inc. and Penn National Gaming Inc., Simkins said in an investment report.
“We think Trump could make an attractive fit with Ameristar, Pinnacle Entertainment and Penn National, as well as potential private buyers," Simkins wrote, adding that Penn seems the least likely because it views Atlantic City more cautiously than other companies.

Las Vegas-based Pinnacle Entertainment bought the Sands Casino Hotel last year for $250 million. Now closed, the Sands and its adjacent beachfront property will be redeveloped by Pinnacle into a $1.5 billion casino resort overlooking the Boardwalk.

Trump Entertainment is facing risk from Pennsylvania's new gaming market and a partial smoking ban slated to begin at Atlantic City casinos on April 15. Trump was unsuccessful in attempts to win a license to operate one of two slot parlors in Philadelphia.

Another threat to Trump and other Atlantic City casino operators is the possibility of state approval for slot machine-like video lottery terminals at the Meadowlands sports complex in northern New Jersey.

“We continue to believe Trump will experience a tough 2007 and 2008 as the company is impacted by the new Pennsylvania slot parlors, Atlantic City smoking restrictions and its failed bid for a Philadelphia slot license," Simkins said in his report. “Nevertheless, the company has assets and real estate that could be attractive to a buyer interested in Atlantic City."

Trump Entertainment operates Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino and Trump Marina Hotel Casino. Donald Trump is the company's chairman and largest single shareholder, owning about a 30 percent stake.

Despite Trump's glitzy name, his casino empire consistently loses money. In the fourth quarter of 2006, the company posted a net loss of $9.7 million, or 31 cents per share.

Trump's casinos traditionally have lagged behind their competitors because the company's suffocating $1.8 billion debt load left no money for major upgrades. However, the company restructured its finances through Chapter 11 bankruptcy in 2005, slashing its debt by $400 million and freeing up extra cash for improvement projects, including an 800-room hotel tower that will open next year at the Taj Mahal.

As part of the bankruptcy plan, Trump was given veto power over the sale of any of his casinos. If he waives his veto power, the company will indemnify him for as much as $100 million for any personal tax liabilities incurred from a casino sale.

Merrill Lynch's hiring is not the first time Trump has been the subject of sale talks. Recently, Trump and Las Vegas gaming mogul Steve Wynn discussed a possible deal for Trump Plaza. If Wynn goes ahead with the plan, Trump Plaza reportedly would be demolished and the site redeveloped for a $3 billion megaresort in the heart of the Boardwalk.

Renewed speculation of a sale boosted trading of Trump Entertainment stock on Friday. The stock added $1.34 a share, up 7.95 percent, to close at $18.19.