Donald Trump's Win in Atlantic City Is Far From a Victory

The bare-knuckle battle between Donald Trump and Carl Icahn lasted 14 months and ended in a Camden, N.J., courtroom. Both moguls were scrapping for control of the addled Trump Entertainment Resorts, and its three Atlantic City casinos: Trump Marina, Trump Plaza, and Trump Taj Mahal. In the end, the bankruptcy judge decided that investors will be better off if the existing bondholders, including Trump, retain control of the company.

Though Trump will hold a mere 5% ownership stake in the hotel/casino group that bears his name, it has not stopped him from crowing about the courtroom win. "This is a great victory for Trump and for the bondholders," he told BusinessWeek, leaving it unclear whether he's talking about his company or referring to himself in the third person. "It's a great loss for Carl Icahn. I was surprised he attempted what he attempted, but that's okay. It's fine."

Far From a Victory for The Donald

Cocky as Trump sounds, you have to wonder how much of a win this really is. Though debt will be going down from $1.7-billion to around $330-million, bondholders will have to pony up an additional $225 million to get there -- plus they hope to sell Trump Marina for an estimated $25 million, less than 10 cents on the dollar that it cost to build in the mid-1980s.

Trump also seems undeterred by the fact that rational investors are steering clear of Atlantic City. Morgan Stanley (MS) took close to a $1 billion hit after cutting its losses on a Boardwalk project called Revel. Pinnacle Entertainment (PNK) took a bath in February after pulling out of a would-be casino it intended to construct on the old Sands Casino plot, and Steve Wynn kicked the tires during a recent bottom-feeding trip to A.C. but left the resort-town empty-handed.

Considering his track record, Trump also seems to have failed to learn from his prior experiences. This is the third voyage to the brink for The Donald and his Eastern seaboard gambling dens: Trump Taj Mahal hopped in and out of bankruptcy in 1991, costing Trump 50% of the operation; one year later, under similar circumstances, he was forced to cede 49% of Trump Plaza to CitiBank. Maybe he's become hardened to the various chapters of overwhelming debt, but he seems downright cheery when characterizing current circumstances for the New York Times: "It's a great time to be a gaming company without much debt and a very healthy capital structure."

Keeping the Trump Legacy Alive

Considering the Trump group's less-than-stellar past, why did the judge allow them to retain control? According to Cory Morowitz, chairman of Atlantic City-based Morowitz Gaming Advisors, that decision was made in an effort to do the most for those for existing investors (including Icahn himself, who holds $480-million worth of Trump debt).

"There was more asset recovery under the Trump plan than under the Icahn plan," says Morowitz. "The smaller balance sheets and reduced debt burden will give the Trump company breathing room to make the investments they need to make. The infusion of capital will hopefully allow them to reposition themselves in order to capture the market that is rejecting them." Money will most likely be spent on upgraded services, amenities, and rooms (an undertaking that has already begun at Taj, with the completion of a new tower).

In light of his small share of the business, coupled with the very public trio of AC bankruptcies under his belt, and the fact that he will have limited say in how the properties are run, you have to wonder why Trump was so gung-ho about keeping his name alive in Atlantic City. "There is hope [in things working out for the casinos] but there is also some ego," says Roger Gros, publisher of Global Gaming Business and a longtime chronicler of Trump and Atlantic City. "If Trump left Atlantic City and his name came off of the buildings, that would be a stain on his reputation. Considering the Celebrity Apprentice ratings, Donald needs to keep his name in lights somewhere."