Trump Entertainment Resorts Inc. (fka TRMPQ)

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Trump casinos’ new owner admits turning the company's fortunes around will be a challenge

ATLANTIC CITY — He’s a billionaire, he’s from New York and he’s the owner of the Trump casinos. But his name isn’t Donald Trump.

Marc Lasry, the main man now in charge of Trump Entertainment Resorts Inc., is a hedge fund manager who led a group of bondholders in a $225 million bankruptcy buyout of the gaming company.

Admittedly a bit jittery about the task ahead of him, Lasry must revive a casino empire that has stumbled through Chapter 11 bankruptcy three times since the early 1990s and continues to struggle in the sluggish economy.

“I’m nervous about it,” said Lasry, the chairman and chief executive officer of New York-based Avenue Capital Group. “I’m also excited. I think it’s a phenomenal opportunity, but at the same time there are challenges. Hopefully, we’ll be able to do a good job.”

Atlantic City got its first public look at the 50-year-old Lasry when he testified about the Trump buyout during a New Jersey Casino Control Commission meeting July 14. The commission gave its regulatory approval for the deal.

Appearing in an open-collar white shirt, Lasry apologized for arriving late to the commission meeting, explaining he had gotten stuck in New Jersey Turnpike traffic. He brought along his 17-year-old daughter, Sophie. Later, he joked to a TV news crew that his daughter should have been the one who was interviewed instead of him because she wanted to be on camera.

Unlike Donald Trump’s bombastic and brash style, Lasry was low key. He cautiously predicted it could take two to five years to complete Trump Entertainment’s turnaround.

Lasry’s Avenue Capital hedge fund, which manages about $20 billion in assets, specializes in investing in distressed companies. Trump Entertainment appears to be one of Lasry’s biggest gambles ever, but he spoke confidently about Atlantic City’s potential upside.

“I hope two years from now, everybody will look back and say, ‘Yeah, that was a good time to invest in Atlantic City,’” Lasry said.

Lasry outlined two factors he sees as crucial for Atlantic City’s resurgence — a better economy and more nongaming attractions. He said the resort must continue to add upscale restaurants, shops, spas and nightclubs to transform itself into a fuller tourist destination that offers more than just gambling.

“We want to make it more of a focus on the entertainment aspect and the family aspect,” he said.

The weak economy and tighter consumer spending have dragged down Atlantic City’s revenue at the same time the nation’s second-largest gaming market has faced fierce competition from surrounding casino states.

“Our job becomes a lot easier if the economy is doing well,” Lasry said.

The new ownership group will give the Trump Entertainment casinos a $100 million cash infusion and reduce the company’s debt from $1.7 billion to $334 million. The company’s annual interest expenses will be slashed from $136.8 million to about $40 million.

Moreover, the ownership change means that Donald Trump will have only a minority stake in the casinos that bear his name. The Lasry-led bondholders have agreed to give Trump as much as 10 percent ownership in exchange for the continued use of the Trump brand.

“I think that Marc Lasry and I would both agree that Donald Trump’s input, Donald Trump’s charisma and Donald Trump’s marketing savvy will be invaluable to us,” Mark Juliano, chief executive officer of Trump Entertainment, explained of Trump’s role ahead.

The Casino Control Commission, the chief regulatory body overseeing Atlantic City’s $3.9 billion gaming industry, welcomed Lasry and his fellow bondholders as the new owners. However, Commission Chair Linda M. Kassekert noted that another Trump bankruptcy restructuring in 2005 was similarly hopeful, but ultimately failed.

“Regrettably, five years later, we have yet another reorganization plan before us, at a time when Atlantic City operators confront ever-increasing competition from our neighboring states, and now cope with the impact of a depressed economy,” Kassekert said.

The New Jersey Division of Gaming Enforcement recommended approval of Trump Entertainment’s new ownership and financial structure, although it stopped short of a ringing endorsement. The DGE concluded the company “appears to minimally satisfy” the legal requirement of financial stability needed by casino licensees. The division remains concerned that Trump has not met financial forecasts and that revenue for all three casinos is already about $50 million lower than this time last year.

Efforts to revitalize Trump Entertainment include selling weak sister Trump Marina Hotel Casino. A proposed, pre-recession sale of the Trump Marina to New York businessman Richard T. Fields fell through. Juliano confirmed that Fields and at least one other undisclosed potential buyer are still interested.

Trump Entertainment and Fields originally reached a tentative $316 million deal for Trump Marina in May 2008. In hopes of salvaging the sale, the price was lowered to $270 million last year before negotiations collapsed. This time around, Trump Marina’s sale price is expected to be closer to $75 million because of the slumping Atlantic City gaming market.

The new owners do not want to spend the money to upgrade Trump Marina, preferring instead to focus on the flagship Trump Taj Mahal Casino Resort and a possible overhaul of Trump Plaza Hotel and Casino. Trump officials estimate it would cost $250 million to build an 800-room hotel expansion at Trump Marina and another $100 million to spruce up the aging casino.

“The Marina needs a lot of work,” Lasry said. “The Marina is in a good location, but it’s dated.”

In the meantime, Trump Entertainment is stuck with Trump Marina at least through 2010. Juliano noted that it would take about six months to complete the deal and secure the regulatory approvals to sell the property if a buyer emerges.

Gaming analysts predict Trump Marina likely will be shut down unless a buyer is found. However, Juliano insisted there are no plans to close the casino.

“If we were to close the Marina, we would put ourselves out of the $8 million to $8.5 million in cash flow from it,” he said. “Besides, it creates such enormous ill will among everyone to close a casino. We still have great employees and customers there.”

Trump Marina has suffered from its location in the Marina District, in the shadow of powerhouse competitors Borgata Hotel Casino & Spa and Harrah’s Resort. One key thing for making it more attractive to potential buyers is for Trump Entertainment to acquire a vacant 14-acre tract of land next door to Trump Marina and sell it as a package deal.

“It’s definitely something we would be interested in doing,” Juliano said.

The land next to Trump Marina is owned by MGM Resorts International, the Las Vegas gaming company formerly known as MGM Mirage Inc. MGM is unloading its Atlantic City property and its half interest in Borgata following a battle with New Jersey gaming regulators over its partnership with a Hong Kong businesswoman for a Macau casino. Despite denials from MGM of any mob ties, New Jersey regulators said Pansy Ho was an “unsuitable” partner for MGM because of reputed links between her father and Asian organized crime.

MGM’s abrupt departure from Atlantic City and Lasry’s bankruptcy takeover of the Trump casinos underscore the volatility of the city’s gaming market, now mired in a four-year revenue decline.

http://www.pressofatlanticcity.com/news/top_three/article_acb5c2f2-96c5-11df-8d16-001cc4c002e0.html