Debt Hopes Lift Trump Hotels

The company says it will make a debt payment by deadline and hopes to cut deal with bondholders soon.
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Shares of

Trump Hotels & Casino Resorts

(DJT)

jumped 6.1% on Wednesday after company officials confirmed they will make a crucial $73.1 million bond payment and said they hoped to settle broad negotiations with bondholders in the next few weeks.

For the past year, Donald Trump's casino empire has been struggling under the weight of $1.8 billion in debt and increased competition in Atlantic City, where it used to dominate the Boardwalk. On May 1, the company missed an interest payment on $1.3 billion of debt backed by the Trump Taj Mahal and Trump Plaza, but used a 30-day grace period to make the payment, which the company said will be made by Friday.

"We are going to make the payment this week," said John Burke, company treasurer. "We will probably make an announcement once the payment is made."

In reaction to the news, shares of Trump rose 11 cents to $1.92.

While the bond payment helps avoid an immediate crisis, the company continues to haggle with bondholders to determine the future of the company. In short, Trump needs bondholders to restructure their debt in order to obtain a $400 million investment from DLJ Merchant Banking Partners, announced in February.

"The negotiations have been constructive -- active and constructive -- but there's no real timeline per se," said Scott Butera, executive vice president and lead negotiator on the debt deal. "We'd like to see something come together in the next two to three weeks, but that's all subject to change."

To get the investment, bondholders would have to discount their own holdings and reduce the interest they'd be paid. But bondholders will also be able to end their contentious relationship with Donald Trump, who would step down as chairman and CEO of the company and see his ownership stake in the company drop from 56% to about 20%.

The deal would dilute current shareholders, but it would also help make Trump competitive again, giving the company funds to invest in its hotel properties, which are seeing profits fall because of competition from the Borgata, a joint venture of

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MGM Mirage

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.