Editor's note: This article appeared in The Press of Atlantic City on Saturday, Nov. 17, 1990.

ATLANTIC CITY — Bondholders will get half of Donald Trump's Taj Mahal Casino Resort and the gaming hall will make what will likely be a brief visit to U.S. Bankruptcy Court under a deal struck Friday.

In an agreement that was finalized more than 12 hours after Trump missed a Thursday midnight deadline to pay bondholders $47.3 million in interest, the two sides reached an agreement that could shave as much as $27 million from the struggling gaming hall's interest expense.

Bondholders, who loaned Trump $675 million two years ago to complete construction of the casino, will receive 50 percent of the equity in the casino hotel and will be able to place several members on a board of directors.

Trump, however, will remain in charge of the property, will serve as chairman of the board and will be able to name a majority of the members.

Despite that, there will be some matters on which Trump will need approval from the minority board members. If the gaming hall can't meet certain performance standards, the bondholders will have the right to name a majority to the board and will receive a management fee of $500,000 a year or 1.5 percent of operating earnings.

"I'm very happy," a tired-sounding Trump said in a telephone interview late Friday. "I think it's going to be a wonderful deal for everybody."

If he thought so, he didn't show it. Reports from a New York press conference at Trump's Plaza Hotel there indicated that Trump looked grim and did not shake hands with bondholder representatives.

"We made what we consider a fair deal - fair to both sides," said Wilbur Ross, a senior managing partner of Rothschild Inc. and financial advisor to the bondholders.

"Fair means that neither side got exactly what it wanted, but both sides made out quite a bit better than they would have in a (contested) bankruptcy," he said.

Ross said bondholders agreed to let Trump keep control of the casino because "he is a valuable asset."

Under the terms of the deal, the interest rate on the bonds will drop from 14 percent to 12 percent. Bondholders have to receive a minimum of 10 percent interest in cash, while the other 2 percent can be paid in additional bonds.

If the gaming hall earns enough money to pay another 1 percent of interest in cash, bondholders will get that money. If there is enough cash to pay the full 12 percent, Trump can either do that or use the money to buy back some of the bonds in the public market, said Robert Miller, an attorney for the bondholders.

Finally, when the bonds mature in the year 2000, if Trump has the cash to pay bondholders the 2 percent of interest that they gave up, he can increase his stake in the casino to 80 percent.

The gaming hall has been struggling since it opened its doors in early April. While it generated a healthy cash flow, it could never make enough money to service its enormous debt.

According to reports filed with the state Casino Control Commission this week, the Taj Mahal lost $11 million in the third quarter of the year - usually the most profitable quarter - on revenues of $128.5 million. Before interest, depreciation, management fees and taxes, the gaming hall generated $30.4 million.

Miller said a "pre-packaged" Chapter 11 bankruptcy reorganization filing could be submitted within several weeks. Under a "pre-packaged" bankruptcy, a company files for Chapter 11 protection and, at the same time, submits a reorganization plan that has already been approved by more than two-thirds of the creditors involved.

Miller indicated that provisions in tax and bankruptcy laws virtually require that the property go through some form of a bankruptcy procedure. By having a pre-packaged reorganization plan, however, the gaming hall can emerge from bankruptcy court protection in a matter of a few weeks.

Ross said the talk of a bankruptcy, however, has been "a bit overdone."

"If it does go in, it will be going in simply because it is the most efficient way to implement the transaction," Ross said.

"Since it will be a technical matter ... the employees won't notice it, the gamblers won't notice it and the trade creditors won't notice it," Ross said.

"A Chapter 11 filing in this context is not a significant event," he added.

Ross and Miller said they were confident that more than enough bondholders have agreed to accept the deal with Trump. Ross said holders of approximately 90 percent of the bonds - including investor Carl Ichan, who apparently is the largest Taj Mahal bondholder - approved the terms of the deal.

Ever the promoter, Trump tried to put the best face on the deal, projected great things for the property and avoided using the term "bankruptcy."

"I think the result is turning out to be a positive one. The Taj Mahal is caught in a huge recession and maybe the word is depression," he said at the New York news conference.

"It's been a very rough period for this part of the country. I think it's going to be that way for some time to come and eventually this part of the country will vibrantly, hopefully come out of it.

"I think the Taj is going to be very successful for many years to come," Trump said. "When we come out of the recession, I think the numbers are going to be just absolutely huge. People love the building. They're going down in droves, but again because of the recession, they're not going down as everybody had hoped."

Efforts to keep Trump's casino empire together now shift to the Trump Castle Casino Resort, which faces a Dec. 15 deadline for an $18 million interest payment. Trump officials met at the gaming hall with a small group of bondholders/investors to discuss various ways to solve that facility's financial problems.

Trump Castle initially missed an interest and principal payment in June but made the payment by the end of a 30-day grace period. In order to make that payment and avert a general financial crisis, however, Trump had to obtain an emergency $65 million loan and restructure much of his $2 billion in bank debt.

Trump officials hope to reach an agreement with Castle bondholders before the Dec. 15 payment date. While it is too soon to know what shape such an agreement will take, the two sides reportedly are considering some form of a debt-for-equity swap that would reduce the interest burden on the struggling facility.

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