Trump forced to yield power at A.C. casinos - Tuesday 12th of April 2005
On "The Apprentice," he's the boardroom boss, a hard-to-please chief executive whose whims decide the fate of would-be underlings dismissed with a brusque putdown: "You're fired."
At his casino company, however, Donald Trump isn't the only one calling the shots.
Poised to emerge from Chapter 11 bankruptcy protection next month, Trump Hotels & Casino Resorts is taking on new board members charged with turning around a company whose Atlantic City casinos have been in bankruptcy twice.
Forced to relinquish majority control, Trump must deal with a reconstituted board of directors dominated by people chosen by bondholders who now control two-thirds of the company.
While he remains chairman and the single-largest stockholder, Trump will be sharing decision-making duties with six new board members, five of whom were chosen by bondholders.
"Anytime a company comes out of (Chapter) 11, the first emphasis of the new board is that it doesn't slip back in," Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said. "Companies that come out of 11 many times end up back in 11."
Trump Hotels, which owns three Atlantic City casinos and a riverboat casino in Gary, Ind., collapsed under the weight of $1.8 billion in high-interest debt and filed for Chapter 11 last November.
Last week, a judge approved a reorganization plan that reduces the company's debt and calls for up to $500 million in new financing from two investment banks. Company officials say the new company -- to be called Trump Entertainment Resorts -- will use the money to spruce up its casinos and make up for ground lost to competitors who have added hotel towers and attractions while Trump's cash-strapped company couldn't.
As part of the reorganization, the company will expand its board of directors from five to nine people, enlisting respected executives, lawyers and casino industry veterans in hopes Trump Hotels doesn't sink again.
Among them: Former Putnam Investments managing director Edward D'Alelio, investment banker Michael Kramer of Greenhill & Co., former TropWorld casino president James Perry and former New Jersey Gov. JamesFlorio.
The outgoing board was chosen by the company, not outside parties, as is the case with five of the six new directors. Trump and two other board members will retain their positions.
But who will be calling the shots in the boardroom?
"I think the bondholders and equity holders have made it clear through the bankruptcy reorganization that they want to see Trump Hotels run more like the publicly held company that it is," said casino industry consultant Joe Weinert, vice president of Spectrum Gaming Group. "There was a sense among many investors beforehand that this company behaved like a private company and that Donald Trump was controlling the shots.
"This is, in fact, a publicly held company and the investors are demanding more independent oversight over the directions and decisions of this company," Weinert said.
For their part, the new board members see their roles as collaborative.
"Any new board member is going to come in to see what happened in the past and make sure it doesn't happen again," Cezar Froelich, 59, a Chicago securities lawyer tapped by bondholders for the Trump board, said. "The advantage this time is that it's on a solid footing," he said, referring to Trump Hotels' fiscal picture. "That's a big difference."
Florio, 67, chosen jointly by Trump and the bondholders, said the new directors will look out for the best interests of the company and its shareholders.
"The process is that the directors are the people responsible for seeing that management performs. I think everyone has come to understand that that set of responsibilities have to be exercised vigilantly," he said.
Trump, meanwhile, said he welcomes the new board members.
"They're all people I've known for a long time. They're great, and they'll be tremendous additions to the board," he said.
The Donald will still wield power.
"Regardless of Trump's apparently lesser role in the company, he is the brand and that cannot be underestimated," said Weinert. "So long as he is the name, the face and the voice of that company, he is going to -- justifiably -- exercise considerable weight in the company's direction."
As for any parallels between the make-believe boardroom of "The Apprentice" and the new Trump Hotels' boardroom, Florio said: "I suspect it will be much less televised."
THE NEW LINEUP
The new directors of Trump Hotels, whose board is being changed as part of a Chapter 11 bankruptcy protection from which the Atlantic City casino company is now emerging:
Holdovers from present board:
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