Gomes and partners have inside track to purchase Trump casinos

Published: Friday, June 15, 2007

ATLANTIC CITY — An investment group led by former Atlantic City gaming executive Dennis Gomes and New York real estate developer Morris Bailey has been given exclusive rights to buy Donald Trump's casino empire.

Under the proposed deal, the Trump name would likely remain on the company's three casinos and Donald Trump would stay on in some capacity, although his role has not yet been defined.

Gomes, who once worked for Trump, and Bailey, who runs the Manhattan-based JEMB Realty Corp., want to acquire Trump Entertainment Resorts Inc. in its entirety instead of buying individual casinos. An announcement is expected in a week or two.

“Morris Bailey and Dennis Gomes are high-quality people and good friends of mine. We will see what happens,” Trump said, declining further comment in an interview Friday.

The Gomes group is said to have the financial backing of global investment bank Jefferies & Co. and Wall Street giant Merrill Lynch & Co. Inc. Merrill was hired by Trump Entertainment in March to help it explore a possible sale and is now in line to buy a piece of the company, according to people familiar with the negotiations.

Gomes and Bailey have been given exclusive buyout rights until Tuesday. Dune Capital Management L.P., a private equity firm run by former Goldman Sachs & Co. executives, is also said to be in the running to buy Trump if a deal falls through with the Gomes group.

Terms have not been disclosed. Gomes and Bailey must overcome a daunting array of legal and financial obstacles to acquire Trump Entertainment, but industry executives interviewed placed the odds of a buyout at 50-50.

Trump, who owns a 31 percent stake in the company and is the largest single shareholder, has final approval of any deal. One sticky issue is whether Trump would receive a windfall of up to $100 million, which was promised to him earlier by Trump Entertainment, to pay his personal income taxes stemming from a casino sale.

Other potential difficulties in completing a deal are the company's suffocating $1.4 billion debt, restrictive bond covenants and the aging condition of the Trump properties. Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino and Trump Marina Hotel Casino may require billions of dollars in improvements to bring them up to the standards of their younger competitors.

Adam Steinberg, casino analyst for Morgan Joseph & Co. Inc., upgraded Trump Entertainment's stock to a “buy” on Friday, but warned of the shaky future of the underperforming Trump Plaza.

“We think this property is a candidate for the wrecking ball if the company is sold,” Steinberg wrote in an investment note.

Other analysts have speculated that both Trump Plaza and Trump Marina could be demolished and redeveloped by a new owner. The Gomes group has no intentions of razing the two casinos, but could pursue a sale later on or seek a joint development partner to refurbish them, according to sources.

Contacted Friday, Gomes would neither confirm nor deny that his group has been selected by Trump Entertainment as the lead buyer. But as he has done in the past, he stressed his confidence in the long-term prospects for the Atlantic City market despite the competitive pressures of new slot parlors in Pennsylvania and New York.

“As far as its potential, I think it's a market that is second to none,” he said. “When you look back at the old days of Atlantic City, at the height of its popularity in the '30s, '40s and part of the '50s, it was the preeminent vacation spot in the East. It had this beautiful ocean, a beautiful beach and fantastic weather for most of the year in the spring, summer and fall. So, the natural attributes are still there.”

- Donald Wittkowski, Press Staff Writer