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Analyst: Trump Playing Game of Chicken

ATLANTIC CITY, New Jersey –- Is Donald Trump's casino empire careening to a fiery end, or is the self-proclaimed deal artist shrewdly maneuvering through an opportunistic window?

That's what investors and analysts are trying to determine in the wake of Trump's ultimatum to bondholders last week. In no uncertain terms, the chairman and CEO of Trump Hotels & Casino said he won't make $96 million in interest payments due this month and next until bondholders agree to "major" cuts in interest rates and extended maturities.

"I am going to withhold interest until we make a deal, at which time we'll make the payment," Trump said.

Indeed, the Trump Atlantic City Associates unit did not pay $73.1 million in interest that was due Nov. 1. A $14.2 million payment is due Nov. 15 and an $8.5 million payment is due Dec. 15. Each issue carries a 30-day grace period before a default would be declared.

Trump says he has the necessary money, and the New Jersey Division of Gaming Enforcement concurs. But citing last week's legalization of casinos in New York, Trump said a debt restructuring is inevitable and called on bondholders to help the company bolster its balance sheet to meet future competition.

Trump is playing a game of chicken, analysts said. Bondholders, remembering the deal they gave Trump during the 1991-92 restructuring of his Atlantic City casinos, could try to force a change of control by foreclosing on his properties. Problem is, Trump's casinos aren't worth the $1.8 billion in debt they carry.

For his part, Trump could threaten to tie up the matter for years in bankruptcy court, during which time bondholders would receive no interest payments.

"It's going to be a pretty contentious process in light of what happened the last time. People are miffed he retained control of the organization," said one Trump institutional bondholder.

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