Trump Still Holds Casino Stake

Contributed by Jennifer Duell -- Hotels, 6/1/2008

Some would say that Donald Trump has his fingers in every pie. Not only is Trump the chairman and president of The Trump Organization, which oversees the newly launched Trump Hotel Collection, he also is chairman of the board and majority shareholder of Atlantic City, N.J.-based Trump Entertainment Resorts Inc. (TER)

Publicly traded on NASDAQ under the ticker symbol TRMP, the company owns and operates three properties including the Trump Taj Mahal Casino Resort and Trump Plaza Hotel and Casino, both located on the Boardwalk in Atlantic City, New Jersey, and Trump Marina Hotel Casino, located in Atlantic City’s Marina District. The company conducts gaming activities and is separate and distinct from Trump’s real estate and other holdings.

Although Trump owns 23.5% of the TER, he does not handle the day-to-day management of the company, according to Charlie Rareshide, research analyst at Coker & Palmer in New Orleans. “Trump helps set the strategic plan for the company—the long-term vision—but he is not as involved in the near-term execution of the plan,” he says.

That is the job of TER CEO Mark Juliano. Under his leadership, TER has implemented a new business model that is focused on increasing the quality of its customers, length of stay and diversifying revenue streams to include more non-gaming amenities. Additionally, he is overseeing the expansion of the Trump Taj Mahal. Scheduled to open in September 2008, the new US$255 million tower at Trump Taj Mahal will feature 782 guest rooms, including 74 suites.

Juliano also has led TER through some difficult times—namely increased competition from Pennsylvania casinos, which have had a more severe impact on TER and other Atlantic City casinos than expected.

Revenues for 2007 decreased to US$988.2 million from US$1.03 billion in 2006. The company actually recorded a loss of US$131.1 million from operations in 2007 compared to a gain of US$101.6 million in 2006.

The majority of the loss is attributable to non-cash charges of US$238.7 million in goodwill and other asset impairment charges and US$4.1 million relating to the refinancing of the company’s credit facility, as well as the decrease in net revenues attributable to a decrease in gaming revenues of US$57.6 million for 2007.

In January, Coker & Palmer downgraded shares of TER from a Buy rating to a Neutral rating and established a 2008 price target of US$4. “We have had to 'pull the plug’ so to speak on shares of Trump in the near term,” Rareshide says. “While the future outlook for Atlantic City looks very attractive, Pennsylvania and surrounding jurisdictions are likely to continue putting pressure on the Atlantic City market.”

Rareshine says that until TER is able to take some of its debt burden off the balance sheet or gets closer to the opening of the new hotel tower at the Taj Mahal, shares are likely to remain at current levels and investors should look for other names in the sector that are more diversified or have a near term catalyst.

And in April, TER issued a statement that it is looking “at opportunities to sell one or more of its other properties” and that it engages in discussions with third parties regarding proposals to acquire company properties. However, it said that it is not party to any agreement to sell any of its casino hotel properties.

TER conducted a three-month search for a buyer last year without success. The stock price of the casino company has fallen 72% since it concluded the sale process, according to analyst reports.