The final witness for Carl Icahn in his attempt to gain control of the three Trump casinos in Atlantic City told a bankruptcy court this morning that a plan offered by Donald J. Trump would lead only to another bankruptcy.
Vince Intrieri, a senior executive at Icahn Partners L.P., a hedge fund controlled by the mogul, has been on the stand today before Judge Judith H. Wizmur.
Under questioning by Icahn attorney Jeff Jonas, Intrieri detailed what he thought was the financial weakness of Trump Entertainment Resorts Inc. if it continued to operate as is.
"This company will be in bankruptcy again within two years," Intrieri said.
He also contended that the debtors plan did not take into account the impact of table games in Pennsylvania, which are expected to begin operating later this year.
Intrieri said he was surprised by this, and said: "You can't do projections without knowing that. For this management team not to be able to take into account one of the most critical factors affecting their business is surprising."
Wizmur must decide between two competing plans for Trump Entertainment, which owns the Trump casinos, to emerge from its third bankruptcy.
For about a week and a half, the bondholders and Trump Entertainment laid out a restructuring plan that would inject $225 million in equity into the company and place about 5 percent of the firm with Donald Trump himself, with rights to buy an additional 5 percent. It also would guarantee the continued use of the Trump name on the casinos.
Last Thursday, attorneys for Icahn Partners began presenting a plan by Icahn and banker Andy Beal that offers $484 million to pay off first-lien notes in exchange for 100 percent equity of the firm and that would eliminate all debt.
The Icahn team has focused on two key issues: that the Trump casinos are in deep financial trouble and mired in debt, and that Icahn has the resources to turn them around.
The bondholders, aligned with Trump Entertainment, Trump and his daughter, Ivanka, wrapped up their case last Wednesday and sought to portray Icahn as an opportunist who was after only short-term profit with little concern for the casinos' future growth. They cited the former Icahn-owned Sands Hotel Casino in Atlantic City, which now sits as vacant land, as an example.
And Donald Trump, in his testimony Feb. 25, said he doubted that Icahn would invest money in the properties. "I've known him for many years," Trump said then. "He's a good friend . . . but he doesn't spend money."
Intrieri countered this viewpoint this morning. He outlined the gradual deterioration of the Sands Hotel Casino after Icahn took possession of it in 2000. He said that it was too small to compete with Atlantic City's bigger and newer casinos. This, he continued, was what led to its second bankruptcy and, ultimately, to Icahn's decision to sell it in late 2006 to Pinnacle Entertainment Inc. of Las Vegas.
"It was not our forte to build something from scratch, and Pinnacle expressed a desire to build a new casino where the Sands stood. We decided to sell and they bought the Sands from us," Intrieri said.
Jonas questioned Intrieri for nearly three hours during the morning session, and Intrieri was poised to return to the stand for cross-examination at 1:45.
He kept bringing the testimony around to Trump Entertainment's financial problems. Just before a break for lunch early this afternoon, Intrieri reiterated why he thought the Icahn plan was superior: "I think the fact that this enterprise for a long time has been significantly leveraged has impacted its ability to compete with the properties it purportedly competes with," he said.
"The cash taken out of the company in the last four years as a result of interest payments and payments to bondholders is why this company needs to be completely deleveraged to solidify not only the company but to solidify Atlantic City, as well."
Closing arguments by both sides are scheduled to begin tomorrow at 1 p.m.
Wizmur is expected to announce the winning plan sometime next month.
If Icahn prevails, it will mark a significant shift in the balance of power in Atlantic City. A court victory will give him control of four of the seaside resort's 11 casinos - equivalent to current leader Harrah's Entertainment Inc.
Last week, the New Jersey Casino Control Commission signed off on the transfer of ownership and operational control of the troubled Tropicana to Icahn, who led a group of investors to buy the casino for $200 million in a bankruptcy auction last summer. The sale closed yesterday.
Icahn now has 45.63 percent equity in the Tropicana as a majority owner.