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Trump vs. Icahn: The Rumble in Atlantic City


Why this courtroom battle will be one to watch.

Donald Trump and Carl Icahn are going head-to-head in court over Icahn's proposal to buy the Trump Entertainment Resorts (TRMP) casinos.

Icahn holds 51% of Trump Entertainment's senior, secured bank debt and would like to convert it into ownership of the company with his partner, Texas banker Andy Beal. If they prevail, Trump would no longer have any stake in the business.

On the other side are the Trump Entertainment bondholders, who have offered to buy the casinos for $225 million. If they prevail, Trump would maintain a 10% stake (down from his previous 23%) in exchange for the continued use of his name on the casinos.

Jeffrey Jonas, Icahn's lead attorney, pointed out that Trump's casinos have been in Chapter 11 bankruptcy three times since the early 1990s and, if allowed to retain ownership, management would likely leverage the company back up to a point that would force it into bankruptcy yet again.

Jonas added that the Trump casinos have missed financial projections in nine of the last 10 years.

Rather than let the case play out in the courts, Trump is sticking to his regular playbook, publicly insulting and belittling Carl Icahn.

Trump said Icahn "runs companies so badly that I think it'd be really bad for the company if he took over."

"I purchased the Stratosphere in Las Vegas out of bankruptcy for $300 million in 2000, cleaned it up and sold it one-and-half-years later for $1.3 billion," Icahn responded. "Somehow, I don't notice the same record at the Taj which went bankrupt three times under Donald's stewardship."

This isn't the first time Trump has gone on the defensive when backed into a corner. When Steve Wynn of Wynn Resorts (WYNN), who, in 2000, was CEO of Mirage Resorts (MGM), announced plans to build the Le Jardin resort in Atlantic City, Trump wasn't pleased to hear that an interloper was going to invade his turf.

After calling Wynn a "scumbag" to a reporter, he said: "We used to be friendly. Had a good relationship, would play golf. Which was always a problem. I kicked his ass in golf. Twice. Once at Winged Foot, and once at his course, Shadow Creek. I shot 73 at Shadow Creek. He was practicing and practicing. He thinks he's a good golfer, but he's terrible. Not that I give a damn."

He continued, "You know, I think Steve's got a lot of psychological problems. I think he's quite disturbed. That's just my feeling. I think he's a very disturbed person."

Wynn, who has called Trump, among other things, a "cartoon," a "perverse exaggeration," and a "second-string adolescent," said, "[Trump's] statements to people like you, whether they concern us and our projects or our motivations or his own reality or his own future or his own present, you have seen over the years have no relation to truth or fact. And if you need me to remind you of that, then we're both in trouble. He's a fool."

Kirk Kerkorian, who took over as head of Mirage Resorts, scuttled Le Jardin and, in partnership with Boyd Gaming (BYD), built the Borgata (which, in 2005, issued a policy that it would fire any cocktail waitress who gained more than 7% of their body weight and didn't lose it within 90 days).

After pouring $1.1 billion into the project, Mirage and Boyd have now put the Borgata -- which saw its gambling revenue decline 5.9% last year -- up for sale. The asking price is somewhere between $700 million and $850 million, but potential buyers don't think it's worth any more than $550 million.

Whatever happens in court, it should be interesting -- if for no other reason than to hear what Donald Trump is going to say next.

If the public is treated to even a single episode like the following one, from 1997, we're in for a treat.

Hosting a dinner at the Taj Mahal, Trump called for silence and threw his arm around a guest. "This is the richest man in Argentina!" he announced. "The richest! He flies up four times a year, gambles $6 million! And where does he gamble? Right here! The Taj Mahal! The richest man in Argentina!"

"Actually, Donald," the man replied, "It's Venezuela."

"Argentina! Venezuela! Whatever! It's all the same!" Trump bellowed. "The point is, the richest man in Venezuela, he gambles with us!"

The question for investors is, should you gamble with Trump?

For most, it would likely be a losing bet.
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