The settlement, which follows earlier approvals by groups representing mortgage holders, calls for Trump Hotels to make a $17.5-million cash payment to its unaffiliated common stockholders. In addition, Donald J. Trump would exchange his right to receive the former World's Fair hotel site here for additional equity in the company, which would raise Trump's stake in the company to about 30% of the company's fully diluted common stock, a larger share than under an earlier recap plan.
The World's Fair site, under the agreement, would be sold at auction, with the company's unaffiliated common stockholders getting the proceeds. But anyone buying the site shouldn't have designs on building a casino there--gaming activities are specifically barred under a perpetual negative covenant.
After the plan's various purchase warrants and reallocations, Trump's 30% share would leave him as the largest individual holder of the company's common stock. "I firmly believe in the future of the company, as evidenced by my increasing my overall ownership in the recapitalized company," says Trump, in a written statement.
The recap proceedings, which began this past November, now call for a reduction of approximately $400 million in the company's indebtedness, with a reduced interest rate of 8.5%. That amounts to an annual interest expense savings of about $98 million, according to Scott C. Butera, the company's president/CEO.
Also part of the package is a working capital facility of up to $500 million, secured by a first priority lien on most of the company's assets, including the Trump Taj Mahal, Trump Plaza and Trump Marina casino/hotels here and the Trump Casino Hotel, a riverboat in Gary, IN. The company plans to use much of the working capital to spruce up its properties, a project that has already started.
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