Earlier this week, Trump Hotels and Casino Resorts (OTC: DJTCQ.OB) was dealt a small blow when a California tribe bought out Trump's casino management contract early. In April 2002, Trump Hotels had agreed to manage what is now the Trump 29 Casino in the Palm Springs area in what was to be a five-year deal. Instead, the Twenty-Nine Palms Band of Luiseno Mission Indians of California will buy out the remainder of the contract for $6 million.
Frankly, that's not such a big deal. And not all is going badly for the debt-laden, cash-bleeding casino operator that filed for bankruptcy just months ago: Last week, the company announced that it had secured $500 million in post-bankruptcy financing. The real question is whether Trump's casino business is worth saving.
For the most part, I think that with cash to invest, there might be parts worth saving.
For one thing, I believe that Trump's Taj Mahal in Atlantic City is perfectly salvageable. On the plus side, the Taj has a large single-level Vegas-style casino floor, a unique and attractive theme, and one of the biggest poker rooms in town. The place is just a little grimy. With a new paint job, new carpeting, upgraded slot machines, and new chips and chairs, the casino could be significantly more competitive.
Trump Plaza has a great location on the Boardwalk. However, I am not a big fan of the cramped multi-story layout consistent with all of the Boardwalk casinos, and that is not a problem that is easily fixed. The Trump Marina is unique, with its marina located on the other side of town near MGM Mirage (NYSE: MGG) and Boyd Gaming's (NYSE: BYD) market-leading Borgata and Harrah's (NYSE: HET). But that casino's location, off by itself, means that in order to be competitive, it requires investment to give gamblers a reason to go there.
I feel a little differently about Trump Indiana, just east of Chicago. The riverboat casino shares a dock, a parking garage, and a dining pavilion with Majestic Star's Fitzgerald's riverboat casino, but the best thing I can say about either of them is that they fill the need for low-end gaming facilities in the market. If you're coming from Chicago, Harrah's recently acquired Horseshoe Hammond (see "Harrah's Gains, Gamers Lose") is a bit closer and much higher class, as is the Harrah's East Chicago casino the company recently sold to Colony Capital (see "Harrah's/Caesars Expects Payoff" and "Smooth Sale for Harrah's?").
Trump and Fitzgerald's cater more to the less profligate locals in Gary, Indiana. That said, I don't see Trump Indiana becoming truly competitive for Harrah's patrons unless Indiana adopts barge-based gaming (as opposed to the large yachts that serve as casinos on the Indiana side of the Chicagoland market). And then, of course, Trump would have to find somebody else to lend the money to build it.
Trump's casino operations are a mess, but they are salvageable. I don't think anybody should buy the stock, but with significant capital investment, I think there is an outside shot that Trump Hotels and Casino Resorts could be both competitive and profitable.
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Fool contributor Jeff Hwang owns none of the companies mentioned above.
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