The Work

November 17, 2009 5:28 PM

Stroock, Kasowitz Lead Way on Trump Casino Deal

Posted by Zach Lowe

Donald Trump will not be taking over the bankrupt casino and entertainment company that bears his name, but he and his daughter will retain a stake in the entity under the terms of a deal Trump struck with the bondholders who will take the company out of bankruptcy, according to court records.

Kasowitz, Benson, Torres & Friedman bankruptcy head David Friedman represented Trump, a longtime firm client. (Friedman, who represented Trump when Trump Entertainment went bankrupt in 2004, is one of the few lawyers Trump has ever said anything nice about, according to this 2004 story from The American Lawyer.) Friedman says he has been representing Trump for about ten years after a mutual friend introduced them.

Trump Entertainment filed for Chapter 11 protection in February--the company's third go-round in Chapter 11, according to our prior reporting. Trump initially offered to buy out bondholders and take the company private with his daughter, Ivanka, but bondholders rejected the deal. The two sides have since submitted dueling bids to buy the company out of bankruptcy court, according to this nice write-up from The Press of Atlantic City. Trump partnered with a Dallas-based bank and submitted a bid to buy the company for $114 million and slash its debt from $1.7 billion to about $490 million, court records show. Bondholders were predictably upset, and they submitted their own bid to scoop up Trump Entertainment for $225 million. 

Kristopher Hansen, cochair of the financial restructuring group at Stroock & Stroock & Lavan, represented the leading bondholders who clashed with Trump. Under the terms of the deal announced today, Trump will withdraw his bid and allow bondholders to take control of Trump Entertainment--and to continue using the Trump name, according to court records and The Press of Atlantic City. In addition, Trump agreed not to compete with Trump Entertainment in New Jersey and five neighboring states; he remains free to use the Trump name elsewhere, Friedman says. In return, Trump and his daughter will receive common stock and warrants giving them a 10 percent stake in the company. 

A bankruptcy court must approve the proposed new ownership arrangement, according to lawyers on the deal.

Both sides said the deal would be best for the company. Hansen released a statement saying bondholders are "very pleased" with the deal. Friedman says the most pressing issue for Trump was controlling how the new company uses his name and maintaining the rights to use his name outside of the region immediately around New Jersey.

The bankruptcy has provided work for several other Am Law firms. Weil, Gotshal & Manges is serving as lead debtor's counsel; Lowenstein Sandler advised other bondholders aligned with the Stroock group; Willkie Farr & Gallagher provided counsel to Trump along with Friedman; and Blank Rome and Bingham McCutchen served various niche roles for Trump Entertainment.

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