NEW YORK -- Donald Trump reached a preliminary agreement Tuesday with Taj Mahal Casino bondholders, including a pre-packaged bankruptcy filing that requires Trump to relinquish 50 percent of the casino's equity.
'Unfortunately, we're not quite there,' said Robert Miller, attorney for the Taj Mahal bondholders. 'I remain optimistic we'll complete it.'
Miller, a partner with the New York law firm of Berlack, Israels & Liberman, said the plan still needed documentation, approval by the bondholders and the Securities and Exchange Commission. He hoped for completion by September.
The plan resembles a preliminary agreement reached in November on the casino's $675 million in debt. It will be submitted to the SEC, and then there will be a 45-day solicitation period to get a majority vote for the bondholders.
Miller said he expects the casino, which is in Atlantic City, N.J., to enter bankruptcy court protection in June and to emerge from bankruptcy in September.
If the casino's business improves dramatically, Trump could recapture up to 80 percent of the casino's equity.
Under the restructuring, the Taj Mahal's cash debt payments will drop to about $72 million a year. If the casino fails to earn enough to make the payments, the Taj Mahal partnership may borrow an additional $50 million to make interest payments.
Such an event would be considered a 'transaction event,' which would trigger bondholder control of the facility's board of directors.
Since the first agreement in November, financier Carl Icahn, the Taj Mahal's largest bondholder, has succeeded in strengthening certain provisions that will make it easier for bondholders to get control of the casino from Trump if the casino's performance falls below expectations.
The Taj Mahal, built with $675 million in junk bonds, opened a year ago. Trump wanted to make the casino the most profitable property in his empire.
But after it opened, Trump's fortunes fell. His bankers gave him a $65 million loan that included deferal of about $1 billion of Trump's $2 billion in bank debt.
Though the casino has had record revenues for an Atlantic City property, it has consistently failed to earn enough to service its debt.
Trump's Trump Plaza Casino last week avoided a restructuring when Fidelity Investments agreed to sell the facility $25 million in bonds in exchange for new bonds secured by the casino's parking garage. Trump Castle, Trump's third Atlantic City Casino, still faces a possible debt restructuring when interest and principal payments come due in June.
The Castle has more than $300 million in casino and bank debt and has had its revenue fall 30 percent thus far in 1991.
Trump missed the Nov. 15 interest payment on the Taj Mahal's bonds, and analysts expect him to miss the May 15 interest payment also.
Attempts to reach casino officials were unsuccessful.
The bonds of the Taj Mahal casino surged Tuesday on preliminary reports that bondholders and Trump had reached an agreement on refinancing the casino's debt.
Trump's Taj Mahal Funding's 14 percent first mortgage bonds, due in 1998, increased 3 points to 61 on the American Stock Exchange. In general, junk bond trading was slow as many traders headed for a high- yield conference in Florida.