A federal bankruptcy judge has handed Donald Trump a legal setback in his battle to buy back three Atlantic City casinos he once controlled.
In a ruling issued Thursday, U.S. Bankruptcy Judge Judith Wizmur ruled Trump Entertainment Resorts bondholders can pursue their offer to invest $175 million in the casino operator.
The bondholders, who stand to lose the $1.25 billion they already have invested in the operator, asked Wizmur to revoke the exclusive right of Trump Entertainment's managers to propose a reorganization plan. The bondholders had filed a motion earlier this month asking Wizmur to block the $100 million Trump deal and instead accept their offer.
|Casinos in crisis -- marketing missing the mark|
|Casinos in crisis Part 2: Back to Basics|
|Casinos in crisis Part 3: Promotions target lost customers|
|Also Check out our Race & Sports Section|
Though they bear his name, Donald Trump currently has no role in running the casinos or in Trump Entertainment Resorts. He resigned as chairman of the board just before the company filed for bankruptcy in February.
The Trump Entertainment board had voted this month to let Trump, his daughter Ivanka and Beal Bank buy the company in a deal that would wipe out other creditors.
In court documents, the bondholders referred to the proposed sale as "a brazen insider deal." They also asked the judge to appoint a special examiner to look into the conduct of Trump Entertainment officials before and during the bankruptcy case.
They alleged the company had decided as far back as April to be bought by Trump and Beal Bank, a Dallas-based bank founded and run by Andy Beal, a close friend of Trump.
Donald Trump, who could not be immediately reached for comment late Thursday afternoon, has expressed optimism that his deal will prevail.
"The board members who approved that deal were appointed by the bondholders," Trump told The Associated Press earlier this month. "The people who served as the bondholders' representatives are the ones who approved this deal because it was the better deal."
The bondholders are offering $175 million for the three casinos — Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino, and Trump Marina.
They also plan to complete the on-again, off-again sale of Trump Marina to Richard Fields — a former protege of Donald Trump — for $75 million.
Fields and his company, Coastal Marina LLC, initially offered $270 million in May 2008 and sued Trump Entertainment last month over the failed sale. Fields claimed the company allowed the property to fall into disrepair and diverted customers to other Trump casinos.
Under the Trump deal, Beal Bank would get co-ownership of the casino and would postpone the due date of its $486 million loan for eight years. Under the bondholders' deal, the bank would get $150 million plus unspecified interest payments at a rate to be set by the judge.
The bondholders' plan also would end litigation in Florida between Trump and Fields. The two had a falling out when Trump accused Fields of secretly cutting him out of a deal to develop a casino with the Seminole Indian tribe.
Question? Comment? E-mail the staff at: Staff of GamingToday