Editor's note: This is the first in a series of articles examining the changing face of the Atlantic City gaming market.

Struggling under the weight of $1.8 billion in debt, Donald Trump's Atlantic City empire is on the verge of collapsing like a house of cards. But if Trump can renegotiate the debt, he will once again prove he's no apprentice to the art of the deal -- even if it's at the expense of current shareholders.

In February, Trump Hotels & Casino Resorts ( DJT) announced plans to obtain $400 million in financing from DLJ Merchant Banking Partners, a unit of CSFB, to renovate hotels, service debt and make the company competitive again.

In exchange for the investment, DLJ will become the majority stakeholder in Trump Hotels, forcing Donald Trump into a minority position and out of his role as chief executive. After more than two decades on the Atlantic City Boardwalk, creating the second-largest gaming market in the world, Trump must lose control of his publicly traded company if he wants his moniker to stay on the marquees of the three buildings his company operates there.

"What Trump's doing right now is for the benefit of the company," says Scott Butera, executive vice president and lead negotiator of the debt deal. "You have a whole new cast of characters involved in the deal and there will be a new majority shareholder."

But the deal comes with a catch. To receive the financing, bondholders must restructure $1.8 billion in debt and take a financial hit. If bondholders don't agree to cut what they're owed, auditor Ernst & Young says Trump Hotels could go bankrupt. He says the financial problems "raise substantial doubt about the company's ability to continue as a going concern" in a letter on March 30. Not only would a bankruptcy drastically reduce what bondholders would be paid, but current equity holders likely would be left with nothing.

To get the deal, Trump Hotels will have to juggle the interests of a number of parties. But the main players are the bondholders who own $1.3 billion in Trump Atlantic City debt, which is backed by the Trump Taj Mahal and the Trump Plaza; and bondholders who have $425 million in Trump Casino Holdings debt, which is backed by the Trump Marina, Trump Indiana and the management contract for the Trump 29.

"The holders of the $1.3 billion issue are a fairly diverse group, consisting of collateralized bond obligations to distressed hedge funds," says John Maxwell, managing director at Merrill Lynch, in a research report.

"Some holders have expressed a desire to accept a 'reasonable' haircut. Other holders we have spoken with would be willing to take their chances in bankruptcy if they are not paid in full."

How Not to Get Rich
In eight years as a publicly traded company, Trump Hotels & Casino Resorts has never posted a profit and has seen the gap between total assets and total liabilities narrow significantly
Year EPS Net Sales Total Assets Total Liabilities
2003 ($3.39) $1.161 billion -- --
2002 -0.16 1.229 $2.196 billion $2.114 billion
2001 -1.15 1.176 2.219 2.117
2000 -2.1 1.214 2.199 2.057
1999 -2.82 1.411 2.267 2.066
1998 -1.69 1.359 2.43 2.017
1997 -1.85 1.399 2.473 1.996
1996 -0.25 976 million 2.455 1.895
Source: Company results/TSC research

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