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ATLANTIC CITY, NJ-Trump Hotels & Casino Resorts, which has long struggled with a sizable debt load that’s been costing it $220 million a year in payments alone, is ready take its case to bankruptcy court. If everything goes as planned, the company could declare Chapter 11 as early as next month.

But Trump Hotels expects to go to court with a battle plan in place that would slice its debt load from more than $1.8 billion to a more comfortable $1.25 billion. After negotiating a recapitalization plan since February, the company has struck a deal with DLJ Merchant Banking Partners III LP, a private equity fund of Credit Suisse First Boston, to restructure its public indebtedness and pump some new money into its operations.

As part of the plan, Donald Trump and the fund would co-invest $400 million of equity. Trump’s portion of that would be $70.9 million, $55 million of which would be in the form of a co-investment with CSFB private equity–effectively a loan. The rest, or $15.9 million, would be in the form of Trump’s 17.625% second priority mortgage notes due 2010. In other words, very little of Trump’s contribution would be actual cash.

The agreement would also leave Trump with a significantly diminished role in the company after it emerges from bankruptcy. According to the reworked numbers, his actual stake in the company would be reduced from 56% to just 25%–the CSFB fund would effectively become the majority owner.

And as part of the agreement, Trump would remain chairman of a reconstituted board, but would cede the CEO title. The nine-member board of the company, which would be renamed Trump International, would include five members named by CSFB, three by Trump and one by joint agreement.

The agreement would also leave the former Trump World’s Fair casino/hotel site in Trump’s own hands, and he would be able to redevelop it as anything but another casino/hotel. Trump also gets to personally keep the company’s interest in the Miss USA/Universe pageant.

“I have had a wonderful, long-standing working relationship with CSFB,” says Trump, in a statement. “I look forward to our recapitalized company being a major player in the evolving gaming industry.”

Other highlights of the deal include a reduction of the average interest rate on the company’s publicly traded indebtedness from about 12% to just under 7.9% per year. That’s expected to cut the company’s annual interest payments nearly in half, to about $110.2 million.

Perhaps most important, it would give the company the ability to get new financing of up to $500 million, secured by a first priority lien on its operating assets. Its major assets–the Trump Taj Mahal, Trump Plaza and Trump Marina casino/hotels here–have been battered by the competition in this gaming mecca simply because the company’s debt load has prevented it from investing any money in its aging properties.

“The liquidity, the reduction in our overall indebtedness and related interest expense, and our flexibility to raise additional financing will enable us to upgrade our existing facilities, and to expand the Trump brand into new jurisdictions,” says Scott Butera, the company’s EVP of corporate and strategic development.

The company’s other properties include a riverboat casino in Gary, IN. It also manages a Native American-owned property in Southern California.

One possible fly in the ointment is that bondholders of the Trump Marina and Trump Indiana properties have not signed off on the agreement, and could challenge it in court. But if all goes well, the company expects to emerge as a reconstituted entity during the first quarter of next year.

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