As reported by: Knight Ridder Newspapers
Donald Trump's casino operations are expected to file for Chapter 11 bankruptcy as early as Monday, as part of an effort to upgrade his Atlantic City, N.J., gaming properties and refinance $1.8 billion in debt.

It will be Trump's second attempt since August to turn around his casinos. The first ended in late September, when the developer and reality TV star halted negotiations with Credit Suisse First Boston and began looking for new investors.

Under a new refinancing plan announced last month, Morgan Stanley will provide a $500 million line of credit to Trump to overhaul his casinos and expand into other jurisdictions, including Pennsylvania and Las Vegas. Another lender, Beal Bank, will give $100 million in interim financing.

“The deal is working real well,” said Trump, who has a penchant for speaking in superlatives, in a phone interview from New York. “We're really happy with it.”

Trump said refurbishing his three Atlantic City casinos remains a top priority.

“We will start immediately to make them fabulous and to bring them up to speed,” he said. “No question.”

Trump has considered expanded his gambling empire for some time. The company also owns and manages casinos in Indiana and California, and is breaking ground on a high-rise condominium in Las Vegas.

Trump has struggled with onerous interest payments for years, emanating from the construction of the $1 billion Trump Taj Mahal, his flagship Atlantic City casino.

The Taj Mahal was financed primarily with junk bonds, and debt payments have prevented the company from making capital improvements on its properties to keep up with the competition such as the $1.1 billion Borgata Hotel Casino & Spa, which opened in July 2003.

“We've gotten huge support from our bondholders across the board on all the major issues,” said Scott C. Butera, president and chief operating officer of Trump Hotels & Casino Resorts, and Trump's lead negotiator on the plan.

If approved, the plan would lower the interest rate on its bonds to 8.5 percent and could save Trump Hotels about $98 million a year in interest payments, Butera said.

In addition to the Trump Taj Mahal, Trump owns Trump Plaza Hotel and Casino and the Trump Marina Hotel Casino. Collectively, the three casinos, which employ more than 8,000, have not turned a profit since 1995.

Trump Hotels incurred operating losses of $87 million in 2003. For the nine months ended Sept. 30, 2004, the company lost $91.5 million.

Barbara J. Cappaert, an analyst for KDP Investment Advisors, who has followed Trump for a decade, said the latest plan was not as sound as the first.

“We view this as slightly worse,” Cappaert said. “In the original plan, there was more equity infusion by the lender, and reduced Trump's role, which would have given the company the ability to attract the talent to renovate the A.C. properties and to grow that market.

“Ultimately, you still have Mr. Trump in a very senior position,” she said. “In the other plan, they paid for him to step aside.”

But Andrew Zarnett, an analyst for Deutsche Bank Securities, said the increased popularity of the Trump brand was an asset.

“It is clear that the value of the Trump brand has greatly been enhanced over the past year and a half in great part to the success of ‘The Apprentice' television show,” wrote Zarnett in an analysis from Oct. 22.

Under the current plan, bondholders would own 63 percent to 65 percent of the company, and Morgan Stanley would be the lender. Trump would have his stake in the company reduced from 56 percent to 27 percent. He would remain chairman and chief executive officer, but Morgan Stanley would control use of his name for the gambling operations.