Trump Entertainment gets confirmation for plan of reorganization

By Caroline Salls and Jennifer Chiou

Pittsburgh and New York, April 12 - Trump Entertainment Resorts, Inc. announced the confirmation of the plan of reorganization it supports along with the ad hoc committee of its 8½% bondholders.

Earlier on Monday, the federal judge ruling on the case said that she would confirm the plan of reorganization proposed by the company and the informal committee of bondholders, but noted that she also would have been willing to confirm a competing plan submitted by Beal Bank and Icahn Partners if the company and noteholders did not agree to make some changes to their plan.

According to judge Judith H. Wizmur's ruling filed with the U.S. Bankruptcy Court for the District of New Jersey, both plans were confirmable.

However, Wizmur said "an overwhelmingly number of creditors voted in favor of the AHC/debtor plan and against the Beal/Icahn plan."

In considering the ruling, Wizmur heard and reviewed extensive testimony and documents from the company and the ad hoc committee, as well as from Icahn Partners, according to a news release, which added that the company expects final emergence from reorganization later this year, upon regulatory approval.

Avenue Capital Group was the lead bondholder throughout the reorganization process and will become the largest shareholder in the company upon emergence, the release added.

The confirmed plan also met support from Donald J. Trump and Ivanka Trump.

Under the confirmed plan, $225 million of new equity will be injected into Trump Entertainment, and the company will benefit from improved liquidity and capital resources.

Additionally, the company will be able to retain the Trump brand for Atlantic City operations, the release noted.

"We are making this investment into this company because we firmly believe in the future of the gaming business in Atlantic City and the strength of the Trump brand," Marc Lasry, chairman and chief executive officer of Avenue Capital Group, said in the release.

"Despite the tough effects of the economic downturn, the fact remains that the attributes that make Atlantic City special have not changed. The incredible proximity to an extensive customer base coupled with a productive regulatory structure creates a promising business opportunity for this company that will be financially stronger than ever upon emergence."

Prior to confirmation, the judge said the significant support for the Trump/noteholder plan by the company's largest creditor constituency, coupled with the treatment of creditors and feasibility considerations "compels the conclusion that the AHC/debtor plan, as modified, should be confirmed."

Wizmur said that confirmation of that plan will allow Trump to shed $1.4 billion of secured debt, to pay first-lien lenders in full and to offer creditors the opportunity to participate in the upside potential of the company.

Required changes

The judge had said the Trump/noteholder plan was confirmable, subject to the following changes:

• A plan provision releasing Trump from a Trump personal guaranty must be deleted from the plan;

• A provision releasing the company's second-lien noteholders from liability for any alleged intercreditor agreement violations must be deleted from the plan;

• A provision offering rights offering backstop parties indemnification must be clarified and limited;

• The noteholders' committee, backstop parties and indenture trustee must apply under section 503 (b) of the Bankruptcy Code for reimbursement of fees and expenses as substantial contributors to the case; and

• The new term loan included in the company/noteholder plan must be modified to give first-lien lenders a 12% rate of interest and a premium.

Wizmur also said the Trump/noteholder plan is confirmable, subject to approval of debtor-in-possession financing.

The judge said if the noteholder plan proponents had not been willing to accept the required plan changes of the DIP financing, the Beal Bank/Icahn plan could have been approved.

"While the AHC/debtor plan is less attractive on the issue of the company's balance sheet at its emergence from Chapter 11, leaving the company with about $334 million of debt, I have concluded that the plan is feasible as proposed, and presents other favorable aspects that enhance its feasibility," Wizmur said prior to confirmation of the plan.

"Most notably, the reorganized debtors under the AHC/debtor Plan would continue to benefit from the use of the Trump brand, and the future support of Donald and Ivanka Trump, free from potential litigation, rebranding costs and disruptions, and the associated business risks with losing the brand.

"The prospect of prompt regulatory approval is stronger for employees, as reflected by the submission of the employees union.

"The members of the [noteholder group] have worked closely with debtors' management for several months, and share a joint vision of a business direction for the company."

Plan terms

As previously reported, under the Trump/noteholder plan:

• $225 million in new equity capital would be contributed from a rights offering representing 70% of the new common stock of the reorganized company, backstopped by some second-lien noteholders, who will receive 20% of the new common stock as a backstop fee;

• First-lien lenders would receive $125 million as a loan repayment from the rights offering, a new term loan in the principal amount of the company's $459 million enterprise valuation, minus the $125 million from the rights offering, 100% of the net proceeds from any sale of the Trump Marina, or the right to credit bid, and 100% of the equity interests in TCI 2, unless they decide not to accept that distribution;

• Second-lien noteholders will receive an equity distribution equal to their share of 5% of the new common stock;

• General unsecured creditors will receive cash equal to the amount of new common stock received by the noteholders;

• Accredited investors who hold either general unsecured claims or second-lien note claims will receive a share of subscription rights to acquire up to 70% of the new common stock or the cash equivalent of the subscription rights; and

• Holders of old equity interests will receive no distribution.

Trump Entertainment Resorts, an Atlantic City-based owner and operator of three casino resort properties, filed for bankruptcy on Feb. 17, 2009. Its Chapter 11 case number is 09-13654.

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