ATLANTIC CITY — Trump Entertainment Resorts Inc. threw its support behind a buyout plan backed by Donald Trump and corporate bondholders after failing to reach a settlement with a billionaire banker who has made his own bid for the bankrupt casinos.
Barring an agreement in the future, the bondholders will compete with Texas banker and high-stakes poker player Andy Beal for control of the three Atlantic City casinos bearing the famous Trump name.
Negotiators tried reaching a settlement prior to a hearing Thursday afternoon in U.S. Bankruptcy Court but told the judge that talks were deadlocked over one key, undisclosed issue.
“We’re really close to a settlement,” Trump Entertainment Chief Executive Officer Mark Juliano said in an interview after the hearing.
Bondholders, who own $1.25 billion in Trump Entertainment notes, have offered to buy the casinos for $225 million. Beal Bank has proposed converting its $486 million mortgage on the casinos into ownership of the company.
Juliano said the company now supports the bondholders’ plan because it provides more money and gives the casinos a better platform for growth. He would not rule out Beal Bank’s plan as a possibility if the bondholders’ deal doesn’t work out.
“Both plans are feasible,” Juliano said.
Donald Trump and Andy Beal originally had teamed up to make a $114 million cash bid for the company. However, Trump switched sides last month, joining the bondholders in return for a 10 percent stake in the casinos once they emerge from Chapter 11 bankruptcy protection.
Beal, through his Dallas-based bank, then launched an offer independent of Trump. Besides converting the mortgage into equity, his proposal would wipe out the company’s debt and also allow bondholders to invest $100 million in the casinos.
Beal attorney Thomas Lauria maintained that the bank’s buyout plan would give the Trump casinos a strong financial base.
“It’s been in bankruptcy three times. We don’t want to see a fourth,” Lauria said of the company’s three separate trips through Chapter 11 since the early 1990s.
Meanwhile, attorneys are expected to resume settlement talks next week, Juliano said. Kristopher Hansen, a lawyer for the bondholders, declined to comment other than to say that negotiations have been “cordial.”
Bankruptcy Judge Judith H. Wizmur encouraged both sides to continue talking, but also scheduled a Dec. 14 hearing to begin reviewing the Beal plan.
“We have some brilliant minds at work, some creative minds who understand what’s at stake,” Wizmur said.
Beal’s mortgage on the Trump casinos makes his bank first in line among bankruptcy creditors. Known as a fearless gambler who relishes big-money poker games, Beal got his start in the Atlantic City gaming industry by buying casino bonds. Now he is trying to wrest an entire casino company from his former ally, Donald Trump.
Trump resigned as company chairman in February after bondholders rejected his offer then to buy them out and take the casinos private. Despite his previous battles with bondholders, his new deal with them would allow them to continue using the Trump name on the casinos in return for a minority stake in the reorganized company.
The company operates Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino and Trump Marina Hotel Casino. Bondholders have talked of the possibility of selling the underperforming Trump Marina to help finance their proposed buyout. Lauria said the Beal plan does not include Trump Marina’s sale.
Trump Entertainment filed for Chapter 11 bankruptcy protection in February. The company, suffering from the weak economy and competition from slot parlors in surrounding states, lacks the revenue stream to keep up with payments on its suffocating $1.7 billion debt, including $1.25 billion in corporate bonds.
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