Wednesday, January 7, 2009

Donald's casinos' stock dirt cheap

To understand just how badly the financial meltdown has hurt casino company stocks, look no further than the sale of stock last week by an executive of Trump Entertainment Resorts, the company founded by real estate mogul Donald Trump.

Eric Hausler, the company's senior vice president for development, sold 2,260 shares of company stock, at 18 cents a share.

He got $406.

Even in a recession, that's Trump change.

The company's stock has been battered by crushing debt, a recession that's leaving less money in people's pockets to gamble, and cutthroat competition for gamblers from slots parlors in Pennsylvania and New York.

Moody's Investors Service this week cut Trump Entertainment's probability of default rating, citing the company's decision to delay a scheduled interest payment on some notes.

The company had delayed a $53.1 million bond interest payment that was due Dec. 1, and the 30-day grace period expired. The casino operator had hoped to reach a deal to restructure $1.25 billion in bond debt during that period.

It has since gotten an extension to Jan. 21, but cautions there is no guarantee a deal can be struck.

If it can't, analysts consider a third trip through bankruptcy court likely for Trump Entertainment.

"Every company down there (in Atlantic City) is in deep trouble," Donald Trump told The Associated Press Tuesday. "Show me one that's not."

Revenue for Atlantic City's 11 casinos was down nearly 7 percent for the first 11 months of 2008; year-end figures will be released Friday.

Trump would not say whether he thought the company would be able to avoid a prepackaged bankruptcy filing if talks with bond holders failed to produce a deal.

"I'm not involved in the management of the company," said Trump, who is chairman of the board and its largest single stockholder. Part of the previous bankruptcy reorganization involved Trump relinquishing operational control of the company.

"I'm just an investor," he said.

Mark Juliano, the company's CEO, said he hopes a deal can be struck with bond holders by the Jan. 21 deadline to restructure the company's finances and avoid a bankruptcy filing.

Moody's rating outlook for the company is negative.

"The negative outlook continues to recognize that while Trump remains in discussions with its lenders and certain note holders regarding a possible restructuring of its capital structure, there is no assurance that any agreement with respect to any restructuring will be reached," Moody's said in a statement.

Trump Entertainment has traded as high as $4.80 per share within the past year. It closed at 32 cents a share Tuesday afternoon, down 6 cents from its morning opening.

Juliano said Hausler and other company officials have set up automatic stock sales at predetermined dates to help with tax liabilities, regardless of the current stock price.

To be sure, other casino operators have also seen their share prices plunge.

Pinnacle Entertainment, which has casinos in Louisiana, Missouri and elsewhere, closed Tuesday afternoon at $8.68 a share, down from a 52-week high of $21.48. MGM Mirage closed at $15.96, down from a 52-week high of $75.08, and Penn National Gaming closed at $22.21, down from a 52-week high of $58.99.

Trump Entertainment hopes to complete a deal to sell Trump Marina Hotel Casino to Richard Fields, a former protege of Donald Trump, by spring for $270 million. But the price had to be slashed last fall from $316 million to keep it from falling through.

Besides Trump Marina, the company owns the Trump Taj Mahal Casino Resort, and Trump Plaza Hotel and Casino.

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