Donald Trump's casino company is in serious financial straits, and it's uncertain if -- or when -- he'll be able to deliver on a promised $108 million casino for French Lick.
Documents filed with the Securities and Exchange Commission and New Jersey bankruptcy court underscore the concerns of Gov. Mitch Daniels and some Republican lawmakers about whether the state's 11th casino should have been awarded to a company that ended up filing for bankruptcy protection.
The Indianapolis Star's review found that less than a month after winning the gambling bid in July, Trump Hotels and Casino Resorts declared that its ability to build, finance and open the casino was "uncertain."
The company doesn't even have the cash to pay $20.9 million in back taxes owed to Indiana, according to the documents. Also, new financing from the bankruptcy reorganization specifically allows for a new hotel tower to be built in Atlantic City, but there's no mention of new construction in Orange County, according to bankruptcy documents.
"He can't do this deal," said Rep. Robert Alderman, R-Fort Wayne, a former police detective who reviewed some of the bankruptcy documents and became concerned enough that he held a public hearing earlier this month about the project.
At a minimum, it appears the casino's opening would be delayed by months.
Vernon Back, attorney for one of the losing bidders, Lauth Property Group, said Trump's company has approached a large number of people about helping out or taking over the project. He declined to say if his group was one of them.
Trump attorney Greg Hahn, of Indianapolis, said the company is not shopping the project and remains committed to Orange County. He pointed out that officials have gotten approval from the bankruptcy court to keep lawyers, architects and engineers on the payroll. In addition, he said, the company is applying for the necessary permits through the Army Corps of Engineers and the state departments of transportation and environmental management.
"We can assure that we are down there and working," Hahn said.
Indiana Gaming Commission officials have said that Trump's casino company is meeting its obligations so far. However, a contract between the company and the state still hasn't been signed. The new executive director of the Gaming Commission also is reviewing the deal.
In July, the Gaming Commission voted 4-2 to pick Trump over two others to operate the state's first land-based, casino. At the time, Trump officials told the commissioners that their financing hinged on a debt reorganization with a large investment-banking firm. Two months after winning the bid, this Trump bailout collapsed.
In November, Trump filed for bankruptcy reorganization, and those proceedings continue.
Financial disclosures with the SEC and bankruptcy court show the magnitude of his problem. The company has $1.8 billion in debt and had $91.5 million in operating losses for the nine months ending in September. Last month, the Twenty-Nine Palms Band of Mission Indians announced it was ending its partnership with Trump for its California casino. And Trump's casino company is working with the Indiana Department of Revenue to pay about $20.9 million in taxes.
Under the bankruptcy reorganization, the company's $1.8 billion in debt would be reduced to $1.25 billion. Donald Trump would remain chairman and CEO and make $2 million a year, while getting ownership of the former Trump World's Fair casino site in Atlantic City and an interest in the Miss Universe competition, according to bankruptcy documents.
This new deal involves $100 million in interim financing to keep the company afloat during the bankruptcy reorganization. A $500 million line of credit from Morgan Stanley, if approved, will repay the interim financing, help build a new hotel tower in Atlantic City, and pay fees, expenses and other "corporate needs" associated with the bankruptcy proceedings and running the company, according to the documents. There's no mention of the Orange County project.
And that means the new casino for French Lick isn't set in stone, said Nicholas L. Georgakopoulos, a professor of law and bankruptcy expert at Indiana University.
He said that if the parties involved in the bankruptcy proceedings, such as the shareholders and the bondholders, are confident in the company's management, then they'll be more likely to finance an expansion.
"But they also have the power to make expansion difficult," he said.
Steve Yoder, an attorney for the Delaware-based Bayard Firm that represents Trump's largest shareholders, said his group is in the early stages of wading through bankruptcy filings and isn't expecting a reorganization that's finished in the next couple of months.
As for the Orange County casino: "We're aware of the project, but there hasn't been a lot of discussion about it."
Even though Trump officials have assured state officials and the public that the bankruptcy will leave enough money for the new casino, Yoder said it's too early to tell how much money could be available for Orange County.
Researchers hired by the Indiana Gaming Commission to evaluate the three applicants for the casino warned of Trump's financial difficulties. The Center for Urban Policy and the Environment at Indiana University-Purdue University Indianapolis pointed out Trump needed to invest all available cash to revitalize its gaming properties in Atlantic City, according to a report submitted to the Gaming Commission. The Trump proposal also didn't include specific information on how the company would pay for the project.
The concerns over Trump's finances prompted Daniels to direct his new Gaming Commission executive director, Ernest Yelton, to review the project.
"I have begun. I consider it a top priority," Yelton said last week on his third day on the job. Yelton said he will be reviewing bankruptcy court documents and financial records and meeting with Trump officials.
Trump did not personally respond to repeated requests from The Star for an interview.
Hahn, Trump's local attorney, said he'll work with state officials on the review.
And there are signs that the project is progressing.
At least eight firms have been approved by the bankruptcy court for Orange County casino work, Hahn said. Bankruptcy documents show that these groups -- although what project they're working on isn't spelled out -- have average monthly bills totaling $130,000.
Bankruptcy documents show that the new name of Trump Indiana will become Trump Springs Valley -- which is where the French Lick casino will be located. In addition, a debt reorganization could strengthen the company, increase its cash flows and perhaps free up other money to build the casino.
Because Trump's company is mired in bankruptcy protection, even if the state does sign off on a contract, it's unknown how long it would take for the bankruptcy court to approve the contract and the start of construction.
Already, the project appears off track.
When they fought for the bid, Trump officials said a new casino would take about 16 months to complete and be done in late 2005, early 2006. But groundbreaking won't happen without a signed contract. Even if a contract is signed and approved in the next few months, that timetable would put a casino grand opening in the second half of 2006.
Rep. Jerry Denbo, D-French Lick, said local citizens are concerned about the delay.
"They expected to see something this past fall," said Denbo, who led the legislative effort to get a casino for his economically depressed hometown. "We're such a poor county, we can't wait."