Celebrity Apprentice Plays Out in NJ Courtroom: Who Will Hear "You're Fired!" -- Icahn or Trump?

Last Updated Jan 29, 2010 2:33 AM EST


Art imitates life as Donald Trump's hit reality show Celebrity Apprentice is coming to Judge Judith Wizmur's U.S. Bankruptcy courtroom in New Jersey. A ruling by the judge has set the stage for the battle to reorganize bankrupt Trump Entertainment Resorts. On January 6, Wizmur approved disclosure statements allowing for a restructuring plan from the casino operator's bondholders, backed by "The Donald" and his daughter Ivanka Trump, to compete with another plan crafted from senior lenders Beal Bank and its new partner, the legendary billionaire Carl Icahn.

Trump Entertainment (TRMPQ.PK) filed for Chapter 11 bankruptcy -- its third plunge into insolvency -- in February 2008 as regional competition and a drop in consumer spending hurt its three Atlantic City casinos, according to regulatory filings. That prevarication, however, neglected to mention that the casino operator's cash flow was incessantly constrained by debt servicing on more than $1.6 billion, resultant from Senior Secured Notes (totaling $1.25 billion) issued in connection with the company's (SECOND) emergence from insolvency in May 2005, combined with spending on expansion of the Taj Mahal resort casino ($255 million), and other property renovations.

The premise of the game show is to bring together 14 celebrities (more like D-listed "we hardly knew ya" types), split into two teams of seven, working a different business plan each week, from selling homemade cupcakes in Times Square one week to inventing a new classic sub for Quiznos the next: the manager of the winning team delivers a check (totaled from monies raised that contest) to the charity of their choice; the losing team heads to the boardroom, where The Donald and (usually) his daughter Ivanka and a guest judge eliminate a chosen slacker. In the last episode, the most business-savvy of the celebrity contestants is crowned "The Celebrity Apprentice" by The Donald and awarded a $250,000 bonus check to deliver to their preferred charity.

"Life doesn't imitate art," says American theatrical icon Woody Allen, "it imitates bad television." And sadly, regulatory filings suggest The Donald has consistently been less than charitable himself, always putting self-interest before the needs of the corporations and other shareholders -- even as the variety of gaming enterprises that bore his name were gasping for cash flow lifelines:

  • The gaming company awarded him payments totaling more than $17 million in the last decade for contracted services as chairman and chief executive (he was dethroned from this position during bankruptcy number two) and other ill-defined service payments;
  • The Company also entered into development deals with the Trump Organization, under which The Donald's own firm had the right of first offer to serve as project leader on any number of construction and development projects. In September 2006, Trump Resorts amended the development agreement and paid The Donald NOT to do any construction work! Total payout to The Donald to sit out ongoing hotel tower construction at the Trump Taj Mahal was about $1.9 million in fiscal 2006; and,
  • Looking at a snapshot -- a static view of frivolous spending for just one year (2006) -- the gaming company freely awarded discretionary spending to other entities owned by Trump, throwing away about $1.7 million for leased office space in Trump Tower in Manhattan and for use of Trump's airplane and golf-courses. Also, the company paid out $563,000 for Trump labeled merchandise, including $470,000 for Trump Ice-labeled bottled water.
In January 2007, The Donald received a star on the Hollywood Walk of Fame Shame
I know that The "Trump" name is a powerful one. Nearly every day I'm approached by one company or another wanting me to put that name on some product or service. They know that with the Trump stamp of approval comes immediate recognition and an expectation of quality and success. - Donald J.Trump (February 21, 2006).
Trump resigned as company chairman in February 2009 after bondholders rejected his offer to buy them out (for a reported $100 million!) and take the casinos private. Subsequent to his resignation, The Donald denied liability for payment of up to $250 million in principal amount of the $1.25 billion in Second Lien Notes (maturing in 2015) he had previously guaranteed as part of the 2005 restructuring (Personal Trump Guaranty - Exhibit 99.1, filed on December 24, 2009).

Having given up his efforts to regain control of Trump Entertainment Resorts, The Donald and his daughter Ivanka have thrown their support to bondholders. And, in the art of his deal, the P.T. Barnum of real estate got those same bondholders who are owed $1.25 billion to halt all litigation and hand over to the Trump's 10 percent of the company -- if they win in court!

And, pitted against The Donald is billionaire activist investor Carl Icahn. In December, Icahn bought 51 percent of the $486 million senior, secured bank debt for about 93 cents on the dollar, aligning himself with Trump's erstwhile casino partner Andrew Beal (Beal Bank, one of the creditors). If successful in gaining ownership of the Trump Taj Mahal, Trump Plaza and Trump Marina, Icahn said he may (read will) take Trump's name off the building(s), according to the New York Post.

The third season of Celebrity Apprentice doesn't premiere until March 14. However, with the contested restructuring hearing slated to commence in Judge Wizmur's own boardroom on February 16, those of us watching this celebrity smackdown likely won't have to wait the extra month to hear someone utter those famous words: "You're Fired!"

  • David Phillips

    David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.