Trump Hotels & Casino Resorts to Go Chapter 11

Donald Trump is one of the greatest salesmen in the history of a nation of salesmen. He has sold America on the idea that he is a great businessman, to the point that winning a job with him is the prize on a game show. His Trump Hotels & Casino Reports is preparing to file Chapter 11 bankruptcy, and it has never turned a profit during the 8 years it has traded as a public company. He's dropping his control in a pre-negotiated proceeding to 25% from 56%. Only in America.

The Chapter 11 is, perhaps, a good thing for the company. It has struggled to pay off debt at least since its IPO in the mid-1990s. Under the deal as currently structured, the remaining $1.8 billion of debt at 12% will plummet to $544 million at 7.875%, about where its competition in Atlantic City, New Jersey is. Bankers will throw in a $500 million line of credit to fix up the Atlantic City properties, stick a new tower on the tacky Trump Taj Mahal ("The Donald" puts his surname on everything he buys, like a child who got hold of his mother's labeling machine), and build up its Las Vegas operation.

However, as good a deal as that is, it underlines that the "art of the deal" is necessary if one hasn't mastered the "art of the business." When Atlantic City was the only spot for legal gambling on the eastern half of the US, the competition Mr. Trump faced was the other casinos in town -- none of which believed in fighting to the death. And there was no way the city was going to do anything to hurt the business. Atlantic City was in bad shape and gambling was supposed to pull it out of the dumper. The town resembles Brighton or Blackpool in England more than Las Vegas, and gambling has yet to improve more than a few blocks. Hope springs eternal.

However, with the 1980s decor and taste (and recalling that defunct Spy magazine rather accurately described Mr. Trump as a "short-fingered vulgarian"), the public was not aching to spend another week-end in Trump casinos. When the courts decided that Native American tribes could open casinos in a tortured judicial logic that eludes most Americans and all foreigners, the competition was not just the other aging casinos in Atlantic City, but rather new resorts in the Catskills, on the Mississippi and elsewhere -- closer to the marks, tourists and high-rollers. Mr. Trump never met this challenge.

The casino business is an easy one if costs are controlled and competition is not cut-throat. So long as Mr. Trump was only dealing with Claridge's and Bally's in New Jersey, he had a chance. When that changed, he was doomed. One hopes he has learned, and his efforts to expand outside Atlantic City are promising. However, he remains a wheeler-dealer, not a builder of business.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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