Chapter 11 is nowhere near the end of the Trump story

Financial Times

Interview with Donald Trump

August 16, 2004

Seated in his New York office overlooking Central Park days after last week’s announcement, Donald Trump wore a black suit and red tie, just as he does in The Apprentice, his hit reality TV show in which he plays himself or, at least, a version of himself: a brash real estate mogul who presides over a group of backstabbing contestants vying for a coveted job at his company.


The small community of French Lick, Indiana, is best known as the hometown of US basketball legend Larry Bird. But that claim to fame did not stop the state’s gambling authority last month from passing over a proposal to build a Larry Bird-branded casino in favour of one from Donald Trump.

The plans were halted with last week’s announcement that Trump Hotels & Casinos Resorts plans to file for Chapter 11 bankruptcy protection next month. But whatever his financial difficulties, it appears the power of Mr Trump’s brand endures.

Chapter 11 does not happen in the fantasy world of reality TV. In real life, Mr Trump said the pre-packaged bankruptcy was a positive step and would allow the casinos to restructure.

“We can make this a really great company,” he said before rattling off projects in Chicago, Korea, Los Angeles and New York that his privately held real estate company – separate from the casinos – has planned. Beyond Mr Trump’s real estate, casinos, golf courses, beauty pageants, books and TV show, the ability to brand and market himself may be his most valuable asset.

Even Steve Wynn, the casino mogul credited with ushering in Las Vegas’s renaissance with his Mirage empire, marvels at Mr Trump’s ability to suspend belief. “He marshals publicity in a way no one else has,” he says. “It’s almost incidental to his business.”

Mr Wynn recalls having lunch with Mr Trump and singer Diana Ross in the early 1980s at Le Cirque in New York before Mr Trump entered the gaming industry. Mr Trump proposed that a Trump-Wynn partnership in Atlantic City “would be more than the world could stand”. Instead of being put off, Mr Wynn was charmed. “He was adorable. He made me giggle,” he says.

The ability to tip reality in his favour allows Mr Trump, for instance, to refer brazenly to himself as New York’s biggest property developer although real estate insiders say there are others who are far bigger. His name is emblazoned on some of Manhattan’s flashiest buildings even though his ownership is relatively modest.

Two walls in Mr Trump’s office are covered with framed magazine covers and photographs of his face and his brass-coloured hair.

Plans for Chapter 11, which protects a company from creditors while it restructures, would give Trump Hotels & Casino Resorts a desperately needed Dollars 400m (Pounds 217m) cash infusion from DLJ Merchant Banking Partners, the private equity arm of Credit Suisse First Boston.

Bond debt would be reduced from Dollars 1.8bn to Dollars 1.25bn and interest rates from 12 per cent to 7.875 per cent. Mr Trump, 57, would step down as chief executive of Trump Hotels, his majority stake would be reduced to 25 per cent and CSFB would become the group’s biggest shareholder. Mr Trump would remain chairman and receive an annual salary of Dollars 2m compared with Dollars 1.5m as chief executive.

Yet this is not the first or most serious stumble for Mr Trump. His meteoric rise in real estate and gaming in the 1980s was followed by a dramatic downfall when Mr Trump’s casinos, then privately held, filed for bankruptcy in the early 1990s.

Trump Hotels aims to get out of bankruptcy in the first quarter of next year but analysts say the process could take longer. While key bondholders have agreed to the plan, another group refuses to take the discount offered by the refinancing.

If the dissenting group does not budge, there could be a protracted battle in the bankruptcy courts. “The best solution for everyone is to come to a consensual agreement,” said Jacques Cornet, analyst with CIBC World Markets. “But in the real world, there’s this thing called ego that gets in the way.”

The rollercoaster ride is nothing new for Mr Trump. “He has consciously, deliberately, methodically set out to make his name a brand and that name has survived ups and downs,” says Mr Wynn. “Love him or hate him, everyone in the world is talking about Trump.”

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