No Love for Trump Casinos

...now it seems the self proclaimed gaming guru can’t even get someone interested in buying his beleaguered company Trump Entertainment & Resorts (NASDAQ NMS: TRMP). The casino company cannot seem to get out from a mountain of debt that has prevented it from ever turning a profit.

Trump currently owns a trio of Atlantic City casinos and has been seeking a buyer for months. Now Merrill Lynch – which had been hired to do a strategic review of the company to help it get sold – said it’s no longer in talks with anyone who may be interested in buying the company.

Since rumors started swirling in March, shares of the company have fallen about 30 percent. And now it looks like the company is out of options for selling the company in one fell swoop. 

“We believe this speaks to the fundamental problems inherent in TRMP's properties at the present and the difficult operating environment in Atlantic City,” said a Bear Sterns analyst’s report. “Our sense is that while June gross gaming revenues at TRMP properties in AC were not strong, they were not materially worse than April or May. We think the Taj should benefit from the easy comp stemming from the weak June 2006 table hold (10.0%), though we note construction disruption on the floor could hinder results.”

The company made a statement this week, noting, “The Company will continue to review other strategic corporate options while implementing its strategic operating plan with a view towards maximizing value for the Company’s shareholders. The Company’s strategic operating plan has specifically been designed to reduce corporate and operating expenses in order to improve margins, increase market share and implement a service-driven culture to improve the customer experience. Initiatives achieved under the plan to date include the commencement of the construction of a new 786-room hotel tower at the Taj Mahal, substantial capital upgrades to the Company’s existing facilities, the deployment of a new revenue management and E-commerce initiative and the recent introduction of the TrumpONE unified players club program,” the release said.

Trump operates three Atlantic City casinos all located in Atlantic City: Trump Plaza, Trump Taj Mahal and Trump Marina. Several years ago he shuttered the failing Trump World’s Fair Casino, which has since been demolished. Trump Plaza and Trump Marina are usually the worst performers in pulling in revenue and are 10th and 11th in revenue of the 11 casino resorts in the City by the Sea.

While Donald Trump is chairman of the company, he is not involved in the day to day operations of the company. He was removed from that position nearly three years ago when the company’s severe financial troubles sent it into bankruptcy. Trump Entertainment filed for Chapter 11 bankruptcy protection in November 2004 when the company couldn’t make payments on its $1.8 billion in debt. It had also sought bankruptcy protection several years before that.

Trump is still the company’s single largest stockholder. Its current leadership has managed to restructure the company’s debt to improve cash flow by reducing debt by nearly $600 million, but it’s still not pulling in enough revenue to be in the black.
Trump properties have consistently lost money, an aberration for the country’s second largest casino market. Additionally, Atlantic City has been experiencing a renaissance and until a couple of months ago was constantly posting month over month revenue record increases. However, now the market is getting pinched from the emerging Pennsylvania gaming scene and new casinos in New York.

According to the AP, Trump Entertainment is taking the position that offers it has received are not suitable.

"Now we will continue as we have to focus on our strategic operating plan, which has produced strong results for us," company spokesman Tom Hickey told the AP.
It’s not looking good for the flagging company as the Atlantic City market is getting crushed by emerging competition from Pennsylvania and New York. Plus onerous smoking laws forbid smoking on the majority of the gaming floor, sending additional business out the door.

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