Value of the Trump Name

A court battle between billionaire investor Carl Icahn and a group of bondholders allied with Donald Trump over control of three Atlantic City casinos has become something of a referendum on the value of the Trump name.

Mr. Trump took the stand Thursday in U.S. bankruptcy court here seeking to salvage an ownership stake in Trump Entertainment Resorts Inc. (TRMP), which filed for Chapter 11 protection a year ago. But in doing so he had to answer allegations by Mr. Icahn’s side — which supports a competing reorganization plan for the company — that the Trump brand has been tarnished by the casinos’ three trips through bankruptcy court.

“The Trump name may no longer be ‘synonymous with business acumen, high quality and style, a luxury lifestyle and enormous success’ as Mr. Trump asserts,” lawyers aligned with Mr. Icahn wrote in earlier court filings.

During cross examination, Mr. Trump fired back: “Well, Mr. Icahn has led companies into many, many bankruptcies.” He later said that Mr. Icahn was unlikely to invest substantially in improving the casinos. “These investors have much more money than Carl Icahn does,” he said, referring to the company’s bondholders.

Mr. Trump has insisted that Mr. Icahn would have no right to use the Trump brand name if he wins control of Trump Entertainment, but has agreed to let the bondholders use his name and his daughter’s in several East Coast states in exchange for 10% of the company. The bondholders, who are owed $1.2 billion, argue that their rights to the name make their reorganization plan more attractive.

Mr. Icahn, however, believes his group also would have the right to use the Trump name under an existing licensing deal, but says the success of the casinos don’t hinge on that. The main disadvantage to losing the name, he says, would be the $15 million to $20 million cost of changing the casinos’ signs.

After the hearings, which are scheduled to resume Tuesday, it will be up to Bankruptcy Judge Judith Wizmur to decide which of the two plans would offer the most value for the company’s creditors.

The outcome could change the landscape of Atlantic City, a struggling seaside gambling mecca once so closely associated with Mr. Trump that some people called it “Trump City.” If Mr. Trump loses his battle, it would mark the first time in more than two decades that he wouldn’t have an ownership stake in a casino there.

Lawyers for Mr. Trump’s side have sought to portray Mr. Icahn as a short-term investor without a clear plan for the three casinos. “His reputation speaks volumes and his actions here,” attorney Kris Hansen said in court Tuesday before showing the judge before-and-after photos of the razed Sands casino in Atlantic City, which Mr. Icahn sold in 2006 to a company that proceeded to tear it down and recently canceled plans to rebuild.

Mr. Trump has emblazoned his name not only on condominium buildings and casinos but also bottled water, cuff links and furniture. While public feelings about him are among the most negative toward a celebrity, according to the Q Score that tracks brand appeal, he maintains value, experts say, by staying consistently on-message.

In court Thursday, Mr. Trump boasted that his brand was recently valued by an outside appraiser at $3 billion.

In an interview Wednesday, Mr. Trump dismissed the idea that financial troubles had tarnished his casino brand. He also dismissed Mr. Icahn’s claims that the Trump gaming brand was damaged, pointing to a recent filing in which Mr. Icahn made clear that he wants to assume the license to the brand. “Every building in Atlantic City is in trouble. OK? This isn’t unique to Trump,” he said. “Everybody wants the brand, including Carl. It’s the hottest brand in the country.”

In the contest Mr. Icahn has aligned himself with Texas banker Andrew Beal, by buying from him at a discount a majority stake in Trump Entertainment’s $486 million mortgage. “I like Donald personally, but frankly I’m a little curious about the big deal about the name,” Mr. Icahn said in an interview. “If the name is so powerful, then how come they went bankrupt three times?”

Mr. Icahn maintains a lower profile than Mr. Trump, notwithstanding a $10 million grant to a New York City park to have a stadium named after him. He said he has never thought about building his own brand. “I got too damn many things to do,” he said.

In a deposition, Mr. Icahn defended his casino investments. “There are very few, in fact probably no one, that has really made the return on investment that I have in the casino business in the last three, in the last four or five, years,” he said. Last year, Mr. Icahn acquired Atlantic City’s big Tropicana Casino & Resort out of bankruptcy for $200 million, and has said he might combine the Tropicana and some of the Trump operations if he emerges the winner.

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