Trump Hotels to Reorganize

Trump Hotels(DJT Quote), the publicly traded operating company that owns three Atlantic City hotels and an Indiana riverboat casino named after Donald Trump, plans a prepackaged chapter 11 filing that will transfer control of the company to an investment subsidiary of Credit Suisse First Boston.

The recapitalization, expected for months amid the intensifying competition between Atlantic City casinos, is intended to cut Trump Hotels' total outstanding debt to $1.25 billion from its current $1.8 billion. The bankruptcy petition, which is expected to be filed before the end of September, will not result in the impoverishment of Mr. Trump, whose primary asset is a real estate development company called The Trump Organization.

The main instrument of the reorganization would be a $400 million equity infusion from Mr. Trump and DJL Merchant Banking Partners, the CSFB unit. Trump's end would be about $71 million, including $55 million in cash plus the contribution of mortgage notes he currently holds on the company's assets. The rest of the investment would come from CSFB.

According to an SEC filing, Mr. Trump's current ownership stake in Trump Hotels will be reduced to roughly 25%, from its current level of more than 50%. CSFB's private equity arms would rise to a diluted 55%. Trump would continue to serve as the company's chairman, although under a new contract. He's currently the company's chairman, CEO and president.

Through the so-called prepackaged filing, Trump Hotels would see the interest rate on its publicly held debt fall to roughly 7.9% from 12%, see its annual interest expense fall by about $110 million, see the maturity of its public debt extended to 10 years, and see its ability to tap additional financing vehicles expand.

Regarding the existing stock, the company said, "Each of the existing stockholders of the company, including Mr. Trump, would either keep their existing shares or, under certain circumstances, exchange their existing shares for new shares with the same economic terms as the company's current shares."