As filed with the Securities and Exchange Commission on September 11, 1998
Registration No. 333-56865
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
Form S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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TRUMP'S CASTLE HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
New Jersey 9999 11-2735914
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
Huron Avenue and Brigantine Boulevard,
Atlantic City, New Jersey 08401 - (609) 441-6060
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Nicholas L. Ribis, President
Trump's Castle Hotel & Casino, Inc.
Huron Avenue and Brigantine Boulevard - Atlantic City,
New Jersey 08401 - (609) 441-6060
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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TRUMP'S CASTLE FUNDING, INC.
(Exact name of registrant as specified in its charter)
New Jersey 9999 11-2739203
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
Huron Avenue and Brigantine Boulevard,
Atlantic City, New Jersey 08401 - (609) 441-6060
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Nicholas L. Ribis, President
Trump's Castle Funding, Inc.
Huron Avenue and Brigantine Boulevard - Atlantic City,
New Jersey 08401 - (609) 441-6060
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
(Continued on next page)
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Approximate date of commencement of proposed sale
of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
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TRUMP'S CASTLE ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
New Jersey 7011 22-2608426
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
Huron Avenue and Brigantine Boulevard,
Atlantic City, New Jersey 08401, (609) 441-6060
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Nicholas L. Ribis, President
Trump's Castle Hotel & Casino, Inc.
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401 - (609) 441-6060
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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with a copy to:
Daniel D. Rubino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019 - (212) 728-8000
================================================================================
<PAGE>
(Continued from previous page)
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 11, 1998
PROSPECTUS
TRUMP'S CASTLE FUNDING, INC.
TRUMP'S CASTLE ASSOCIATES, L.P.
Offer to Exchange $1,000 in principal amount of 10 1/4%
Senior Secured Notes due 2003, Series B
for each $1,000 in principal amount of outstanding 10 1/4%
Senior Secured Notes due 2003, Series A
TRUMP'S CASTLE HOTEL & CASINO, INC.
TRUMP'S CASTLE ASSOCIATES, L.P.
Offer to Exchange $1,000 in principal amount of 10 1/4%
Senior Secured Notes due 2003, Series B
for each $1,000 in principal amount of outstanding 10 1/4%
Senior Secured Notes due 2003, Series A
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Trump's Castle Funding, Inc., a New Jersey corporation ("Funding"), and
Trump's Castle Associates, L.P., a New Jersey limited partnership (the
"Partnership" and, together with Funding, the "Senior Note Issuers"), hereby
offer to exchange (the "Senior Exchange Offer") up to $62,000,000 in aggregate
principal amount of their 10 1/4% Senior Secured Notes due 2003, Series B (the
"Senior Exchange Notes") for up to $62,000,000 in aggregate principal amount of
their outstanding 10 1/4% Senior Secured Notes due 2003, Series A issued in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended (the "Securities Act") (the "Senior Original Notes" and, together
with the Senior Exchange Notes, the "Senior Notes"). Funding is a wholly owned
subsidiary of the Partnership.
Trump's Castle Hotel & Casino, Inc., a New Jersey corporation ("TCHI"), and
the Partnership (together with TCHI, the "TCHI Note Issuers") (the TCHI Note
Issuers, together with the Senior Note Issuers, the "Issuers"), hereby offer to
exchange (the "TCHI Exchange Offer" and, together with the Senior Exchange
Offer, the "Exchange Offer") up to $5,000,000 in aggregate principal amount of
their 10 1/4% Senior Secured Notes due 2003, Series B (the "TCHI Exchange Notes"
and, together with the Senior Exchange Notes, the "Exchange Notes") for up to
$5,000,000 in aggregate principal amount of their outstanding 10 1/4% Senior
Secured Notes due 2003, Series A issued in reliance upon an exemption from
registration under the Securities Act (the "TCHI Original Notes" and, together
with the Senior Original Notes, the "Original Notes") (the TCHI Original Notes,
together with the TCHI Exchange Notes, the "TCHI Notes") (the TCHI Notes,
together with the Senior Notes, the "Notes"). TCHI owns a 1% general partnership
interest in the Partnership. Both TCHI and the Partnership are wholly owned by
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"), which in turn is
a subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR").
The terms of the Exchange Notes will be substantially identical in all
respects (including principal amount, interest rate, maturity and ranking) to
the terms of the Original Notes for which they may be exchanged pursuant to the
Exchange Offer, except that (i) the Exchange Notes will be freely transferable
by holders thereof (except as provided below) and (ii) the Exchange Notes will
be issued without any covenant of the Issuers regarding registration. The Senior
Exchange Notes will be issued under the indenture governing the Senior Original
Notes (the "Senior Note Indenture") and the TCHI Exchange Notes will be issued
under the indenture governing the TCHI Original Notes (the "TCHI Note
Indenture"). The Exchange Notes will be, and the Original Notes are, senior
secured obligations of Funding and TCHI, as applicable, and will be and are
fully and unconditionally guaranteed on a senior basis by the Partnership (the
"Guarantor" and, together with Funding and TCHI, the "Registrants") and are the
joint and several obligations of the Guarantor. Funding's 11 3/4% Mortgage Notes
due 2003 (the "Mortgage Notes") and Funding's Increasing Rate Subordinated
Pay-in-Kind Notes due 2005 (the "PIK Notes") are expressly subordinated to the
indebtedness of the Notes.
(Cover page continued on page 2)
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SEE "RISK FACTORS" ON PAGE 13 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY ACQUIRORS OF THE EXCHANGE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR ANY OTHER REGULATORY
AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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The date of this Prospectus is __________, 1998
<PAGE>
(Continued from Cover page)
The Notes will bear interest from and including their respective dates of
issuance, April 17, 1998. Holders whose Original Notes are accepted for exchange
will receive accrued interest thereon to, but not including, the date of
issuance of the Exchange Notes, such interest to be payable with the first
interest payment on the Exchange Notes, but will not receive any payment in
respect of interest on the Original Notes accrued after the issuance of the
Exchange Notes. Interest on the Notes will be payable in cash, semi-annually in
arrears on April 30 and October 31 of each year, commencing October 31, 1998.
The Notes will mature on April 30, 2003. The Issuers may elect at any time to
redeem all, but not less than all, of both the Senior Notes and the TCHI Notes
at 100% of the principal amount thereof, together with accrued and unpaid
interest through the date of redemption. See "Description of the Senior Notes."
The Partnership's consolidated outstanding indebtedness for borrowed money at
June 30, 1998 is approximately $362.8 million, consisting of $62.0 million of
Senior Notes, $5.0 million of TCHI Notes, $213.6 million of Mortgage Notes,
$79.5 million of PIK Notes and approximately $2.7 million of other indebtedness.
At June 30, 1998, none of the Partnership's indebtedness is senior or pari passu
to the Senior Notes and the TCHI Notes. For a complete description of the terms
of the Exchange Notes, including provisions relating to the ability of the
Issuers to create indebtedness that is senior or pari passu to the Exchange
Notes, see "Description of the Senior Notes." There will be no cash proceeds to
the Issuers from the Exchange Offer.
Funding's payment obligations under the Senior Notes and TCHI's payment
obligations under the TCHI Notes, and the guarantees thereof by the Partnership,
will be secured on a senior basis by substantially all of the real and personal
property owned or leased by the Partnership. The liens securing the Notes will
be senior to the liens securing the Mortgage Notes and the PIK Notes.
The Original Notes were originally issued and sold on April 17, 1998 in a
transaction not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A of the
Securities Act (the "Initial Offering"). Accordingly, the Original Notes may not
be reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon
interpretations by the Staff (the "Staff") of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Issuers believe that
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold and otherwise transferred by
holders of the Notes ("Holders") thereof (other than any Holder which is (i) an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act, (ii) a broker-dealer who acquired Original Notes directly from the Issuers
or (iii) a broker-dealer who acquired Original Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such Holder's business and such
Holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal accompanying this prospectus (the "Letter of Transmittal") states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act (even though some selling broker-dealers may be deemed to be an
"underwriter" within the meaning of the Securities Act). Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Issuers have agreed that, for a period not to exceed
120 days after the Exchange Date (as defined), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. Any
Holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
The Exchange Notes will constitute a new issue of securities with no
established trading market. Any Original Notes not tendered and accepted in the
Exchange Offer will remain outstanding. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered, and tendered but unaccepted, Original Notes could be adversely
affected. Following consummation of the Exchange Offer, the Holders of Original
Notes will continue to be subject to the existing restrictions on transfer
thereof and the Issuers will have no further obligation to such Holders to
provide for the registration under the Securities Act of the Original Notes
except under certain limited circumstances. See "Original Notes Registration
Rights." No assurance can be given as to the liquidity of the trading market for
either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on __________, 1998, unless extended
(the "Expiration Date"). The date of acceptance for exchange of the Original
Notes (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of the Original Notes. Original Notes tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date; otherwise such tenders are irrevocable.
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
Funding and the Partnership are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports and other information required by the
Commission. Periodic reports and other information filed by Funding and the
Partnership with the Commission may be inspected at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding companies that file electronically with the Commission.
The address of such site is http://www.sec.gov. Copies of such material can also
be obtained from the Partnership upon request. Any such request should be
directed to the Secretary of the Partnership at Brigantine Boulevard and Huron
Avenue, Atlantic City, New Jersey 08401, telephone number (609) 441-6060.
The Issuers' obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record by
fewer than 300 Holders at the beginning of any fiscal year of the Issuers, other
than the fiscal year in which the Registration Statement or any Shelf
Registration Statement (as defined) becomes effective. The Issuers have agreed
that, whether or not they are required to do so by the rules and regulations of
the Commission, for so long as any of the Notes remain outstanding, they will
furnish to the Holders of the Notes and submit to the Commission (unless the
Commission will not accept such materials) (i) all quarterly and annual
financial information that would be required to be contained in filings with the
Commission on Forms 10-Q and 10-K if the Issuers were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Issuers' certified independent accountants, and (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
the Issuers' were required to file such reports. In addition, for so long as any
of the Notes remain outstanding, the Issuers have agreed to make available upon
request to any prospective purchaser of, or beneficial owner of Notes in
connection with any offer or sale thereof, the information required by Rule
144A(d)(4) under the Securities Act.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUERS SINCE THE DATE HEREOF.
ii
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION ..................................................... ii
PROSPECTUS SUMMARY ........................................................ 1
RISK FACTORS .............................................................. 13
High Leverage and Fixed Charges ......................................... 13
Holding Company Structure ............................................... 13
Limitations On Ability To Realize On Collateral ......................... 13
Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing ........................... 14
Risks Associated with a Change of Control ............................... 15
Restrictions on Certain Activities ...................................... 15
Risks Associated with Use of Proceeds ................................... 15
Reliance Upon Partnership Notes for Payments
on the Notes .......................................................... 15
Historical Results; Past Net Losses ..................................... 16
Control and Involvement of Trump ........................................ 17
Competition ............................................................. 17
Reliance on Key Personnel ............................................... 20
Strict Regulation by Gaming Authorities ................................. 20
Taxes and Fees .......................................................... 20
Limitations on License of the Trump Name ................................ 20
Seasonal Nature of Revenues and Cash Flow ............................... 21
Risks Related to Creditworthiness of Patrons ............................ 21
Failure to File Currency Transaction Reports ............................ 21
Fraudulent Transfer Considerations ...................................... 22
Forward-Looking Statements .............................................. 22
Lack of Public Market for the Exchange Notes ............................ 22
Consequences of Failure to Exchange ..................................... 23
USE OF PROCEEDS ........................................................... 23
THE EXCHANGE OFFER ........................................................ 24
Purpose of the Exchange Offer ........................................... 24
Terms of the Exchange ................................................... 24
Expiration Date; Extensions; Termination;
Amendments ............................................................ 25
How to Tender ........................................................... 25
Terms and Conditions of the Letter
of Transmittal ........................................................ 27
Withdrawal Rights ....................................................... 28
Acceptance of Original Notes for Exchange;
Delivery of Exchange Notes ............................................ 28
Conditions to the Exchange Offer ........................................ 28
Exchange Agent .......................................................... 29
Solicitation of Tenders; Expenses ....................................... 29
Appraisal Rights ........................................................ 29
Other ................................................................... 30
CAPITALIZATION ............................................................ 31
CONSOLIDATED SELECTED FINANCIAL DATA ...................................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ........................................................... 33
BUSINESS .................................................................. 38
General ................................................................. 38
Trump Marina ............................................................ 38
Trademark/Licensing ..................................................... 42
Certain Indebtedness of the Partnership ................................. 42
Atlantic City Market .................................................... 43
Competition ............................................................. 44
Gaming and Other Laws and Regulations ................................... 47
Properties .............................................................. 53
Legal Proceedings ....................................................... 53
MANAGEMENT ................................................................ 56
Directors and Executive Officers of the Issuers ......................... 56
Executive Compensation .................................................. 58
Employment Agreements ................................................... 60
Compensation of the Board of Directors .................................. 60
Compensation Committee Interlocks and Insider
Participation ......................................................... 60
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS .................................................... 61
STOCK OWNERSHIP ........................................................... 62
DESCRIPTION OF THE SENIOR NOTES ........................................... 63
General ................................................................. 63
Guarantee ............................................................... 63
Security ................................................................ 63
Ranking ................................................................. 64
Non-Recourse ............................................................ 64
Mandatory Redemption .................................................... 65
Optional Redemption ..................................................... 65
Certain Covenants ....................................................... 65
Merger and Sale of Assets, etc .......................................... 70
Events of Default ....................................................... 71
Defeasance or Covenant Defeasance of Senior
Note Indenture ........................................................ 73
Satisfaction and Discharge .............................................. 74
Modifications and Amendments ............................................ 74
Gaming Laws ............................................................. 75
The Purchase Agreement .................................................. 75
The Senior Note Mortgage and the Senior
Guarantee Mortgage .................................................... 76
The Senior Note Trustee ................................................. 77
Usury Law ............................................................... 77
Registration Rights ..................................................... 77
Intercreditor Agreement ................................................. 78
Certain Definitions ..................................................... 78
DESCRIPTION OF THE TCHI NOTES ............................................. 87
General ................................................................. 88
Guarantee ............................................................... 88
Security ................................................................ 88
Ranking ................................................................. 88
Non-Recourse ............................................................ 89
Mandatory Redemption .................................................... 89
Optional Redemption ..................................................... 89
Certain Covenants ....................................................... 89
Merger and Sale of Assets, etc .......................................... 89
Events of Default ....................................................... 89
Defeasance or Covenant Defeasance of TCHI Note
Indenture ............................................................. 89
Registration Rights ..................................................... 89
DESCRIPTION OF OTHER INDEBTEDNESS ......................................... 90
The Mortgage Notes ...................................................... 90
The PIK Notes ........................................................... 91
ORIGINAL NOTES REGISTRATION RIGHTS ........................................ 93
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS ...................................................... 94
No Original Issue Discount ............................................ 95
The Exchange Offer .................................................... 95
United States Holders ................................................. 95
Non-United States Holders ............................................. 96
PLAN OF DISTRIBUTION ...................................................... 97
LEGAL MATTERS ............................................................. 98
EXPERTS ................................................................... 98
INDEX TO FINANCIAL STATEMENTS ............................................. F-1
iii
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. Unless the context otherwise requires, the term
"Issuers" as used in this Prospectus includes TCHI, Funding and the Partnership.
This Prospectus contains forward-looking information that involves risks and
uncertainties and such information is subject to the assumptions set forth in
connection therewith and the information contained herein. See "Risk
Factors--Forward-Looking Statements."
TRUMP MARINA
The Partnership owns and operates Trump Marina Hotel Casino ("Trump
Marina"), a luxury casino hotel located on 14.7 acres in the Marina District
approximately two miles from The Boardwalk. Trump Marina is approximately
one-quarter mile from the "H-Tract," an approximately 150-acre parcel of land
proposed to be Atlantic City's newest area of casino hotel development (the
"H-Tract"). Trump Marina consists of a 27-story hotel tower with 728 rooms,
including 185 suites, 99 of which are oversized luxury suites, and contains
approximately 75,900 square feet of gaming space. Trump Marina offers 2,198 slot
machines, 91 table games, 8 restaurants, approximately 58,000 square feet of
convention, ballroom and meeting space, a 9-story parking garage, which can
accommodate approximately 3,000 cars, a 540-seat cabaret theater, two cocktail
lounges, a swimming pool, tennis courts, a health club and a roof-top helipad.
In addition, Trump Marina operates a 645-slip marina which is adjacent to the
casino hotel. An elevated enclosed walkway connects Trump Marina to a two-story
building which contains offices, a nautically themed retail store, a cocktail
lounge and a 240-seat gourmet restaurant that overlooks the marina and the
Atlantic City skyline. As a result of its high quality amenities, its
exceptional customer service and its geographical location, Trump Marina
distinguishes itself as a desirable alternative to the Atlantic City casinos
located on The Boardwalk.
Management believes that the Partnership benefits from the following
factors:
o Atlantic City Facility. The Partnership owns and operates Trump
Marina, which is located in the Marina District. The Partnership
believes that Trump Marina's location, reputation for high quality
amenities and first-class customer service and targeted marketing
strategies are ideally suited to capitalize on the growth in the
Atlantic City gaming market.
o Trump Marina Retheming. In 1997, Trump Marina completed a project to
retheme the casino hotel with a nautical emphasis, targeting younger
customers by offering contemporary entertainment attractions and
emphasizing Trump Marina's energetic, lively atmosphere.
o The "Trump" Name. The Partnership capitalizes on the widespread
recognition of the "Trump" name and its association with high quality
amenities and first-class service. To this end, the Partnership
provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality.
The following table profiles the Partnership's current casino and hotel
capacity at Trump Marina:
Trump Marina
------------
Gaming square footage ......................... 75,900
Slot machines ................................. 2,198
Table games ................................... 91
Hotel rooms ................................... 728
During the second quarter of 1997 the Partnership rethemed the property
with a nautical emphasis and renamed it Trump Marina Hotel Casino. Prior to the
acquisition of Trump Marina (which at that time was Trump's Castle Casino
Resort) (the "Castle Acquisition") on October 7, 1996 by THCR Holdings, the
partners in the Partnership were TC/GP,
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1
<PAGE>
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Inc., currently known as Trump Casinos II, Inc. ("TCI-II"), which had a 37.5%
interest in the Partnership, Donald J. Trump ("Trump"), who had a 61.5% interest
in the Partnership, and TCHI, which had a 1% interest in the Partnership. Trump,
by virtue of his ownership of TCI-II and TCHI, was the beneficial owner of 100%
of the common equity interest in the Partnership, subject to the right of
holders of warrants for 50% of the common stock of TCHI (the "Castle Warrants")
to acquire an indirect beneficial interest in 0.5% of the common equity interest
in the Partnership. Subsequent to the Castle Acquisition, the partners in the
Partnership are THCR Holdings, which has a 99% limited partnership interest in
the Partnership, and TCHI, which has a 1% general partnership interest in the
Partnership. THCR Holdings, by virtue of its ownership of TCHI, is the
beneficial owner of 100% of the common equity interest in the Partnership.
The Castle Acquisition has provided THCR with a significant presence in the
Marina District, the principal focus of expansion in the Atlantic City gaming
market (the "Atlantic City Market"). In addition, the Castle Acquisition has
provided further opportunities for operational efficiencies and economies of
scale and eliminated the perceived conflict of interest caused by the differing
ownership of Trump Marina and the other THCR properties in Atlantic City: Trump
Plaza Hotel and Casino ("Trump Plaza") and the Trump Taj Mahal Casino Resort
(the "Taj Mahal"). Ownership of Trump Marina will enable THCR to retain patrons
that may be drawn from The Boardwalk to the Marina District by new casino
development in the Marina District. The Castle Acquisition has also enabled THCR
to benefit from (i) the excellent condition of the current facilities at Trump
Marina, which have been designed to accommodate additional development with
minimal disruption to existing operations and (ii) the proximity of Trump Marina
to the H-Tract.
On October 23, 1996, Trump Casino Services, L.L.C., ("TCS"), Trump Plaza
Associates ("Plaza Associates"), Trump Taj Mahal Associates ("Taj Associates")
and the Partnership entered into an Amended and Restated Services Agreement
pursuant to which TCS provides each of Plaza Associates, Taj Associates and the
Partnership certain management, financial and other functions and services
necessary and incidental to the respective operations of each of their casino
hotels. Management believes that TCS's services to the Partnership will result
in cost savings and operational synergies. Trump Communications, L.L.C. ("Trump
Communications"), a New Jersey limited liability company and a subsidiary of
TCS, was formed on January 31, 1997 for the purpose of realizing cost savings
and operational synergies by consolidating advertisement functions of, and
providing certain services to, each of Plaza Associates, Taj Associates and the
Partnership.
Management's recent retheming of Trump Marina is intended to build upon the
casino's established customer base by attracting a younger crowd to the
facility. In keeping with this initiative, management has aimed to differentiate
Trump Marina from other Atlantic City casinos by offering contemporary
entertainment attractions and introducing its current "Wild Side" marketing
campaign. The "Wild Side" marketing program consists of a coordinated
advertising, entertainment and marketing campaign that is geared toward a
younger generation of patrons but will not exclude Trump Marina's established
customer base. Management, which developed the "Wild Side" marketing program
after careful study of the Atlantic City Market, seeks to accomplish its goals
via an advertising campaign with a fun and youthful appeal, as well as providing
varied and extensive contemporary entertainment in the Grand Cayman Ballroom,
"The Shell" (a cabaret style theater), "The Wave" (a night club), "The Deck"
(for outdoor summertime entertainment) and large outdoor performances billed as
"Rock the Dock" concerts.
By providing and maintaining a first-class facility and exceptional
service, Trump Marina has earned the Five Star Diamond Award from the American
Academy of Hospitality Sciences, the American Automobile Association's "Four
Diamond" rating and a "Four Star" Mobil Travel Guide rating. Trump Marina
provides a broadly diversified gaming and entertainment experience consistent
with the "Trump" name and reputation for quality amenities and first-class
service.
Atlantic City Market
The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.91 billion in gaming revenues
in 1997, an approximately 2.1% increase over 1996 gaming revenues of
approximately $3.83 billion. From 1992 to 1997, total gaming revenues in
Atlantic City have increased approximately 21.4%, while the number of hotel
rooms increased by 25.5% during that period. Although total visitor volume to
Atlantic City remained relatively constant in 1997, the volume of bus customers
dropped to 9.4 million in 1997, continuing a decline from 11.7 million in 1991.
The volume of customers traveling by other means to Atlantic City has grown from
20.4 million in 1992 to 34.3 million in 1997.
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2
<PAGE>
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The approximately $3.91 billion of gaming revenues produced by the 12
Atlantic City casino hotels in 1997 exceeded the approximately $3.77 billion of
gaming revenues produced by all casinos on the Las Vegas Strip for the same
period, even though the 12 Atlantic City casino hotels have less than
one-quarter the number of hotel rooms of such Las Vegas Strip casinos.
Due principally to an improved regulatory environment, the general
improvement of economic conditions in 1995, 1996 and 1997 and existing high
occupancy rates, significant investment in the Atlantic City Market has been
initiated, occurring and/or announced. For example, the $88 million "Grand
Boulevard" corridor features redesigned roadways, improved lighting, complete
landscaping, a cascading waterfall and a 60 foot lighthouse tower with evening
laser shows. In addition, The New Jersey Sports and Exposition Authority
("NJSEA") has overseen the development of the new Atlantic City Convention
Center, which opened in May 1997 and is the largest exhibition space between New
York City and Washington, D.C. The new Atlantic City Convention Center is
located at the base of the Atlantic City Expressway. The existing Atlantic City
Convention Center is scheduled to undergo a $50 million renovation, and the new
Atlantic City Convention Center holds approximately 500,000 square feet of
exhibit and pre-function space, 45 meeting rooms, various food- service
facilities and a 1,600 car underground parking garage. Additionally, the State
of New Jersey has commenced a long-term capital plan to upgrade and expand the
Atlantic City International Airport. To date, approximately $18 million has been
spent on renovation of the airport terminal and upgrades of the airport's access
roads and parking facilities. The Partnership believes that Trump Marina's
position as an Atlantic City attraction will enable it to attract a large
portion of any increase in the number of potential casino hotel patrons.
THCR's Corporate Structure
The partners of the Partnership are THCR Holdings, a Delaware limited
partnership, and TCHI, a New Jersey corporation wholly owned by THCR Holdings.
THCR Holdings is owned approximately 63% by THCR as both a general and limited
partner, and approximately 37% by Trump. THCR Holdings' wholly owned
subsidiaries include the following:
o Trump Atlantic City Associates ("Trump AC") and its subsidiaries,
Plaza Associates and Taj Associates. Plaza Associates owns and
operates Trump Plaza, which also includes Trump World's Fair, located
in Atlantic City, New Jersey. Taj Associates owns and operates the Taj
Mahal, located in Atlantic City, New Jersey.
o Trump Indiana, Inc. ("Trump Indiana"). Trump Indiana, which commenced
operations in June 1996, owns and operates a riverboat gaming facility
at Buffington Harbor, on Lake Michigan, Indiana.
o The Partnership. The Partnership owns and operates Trump Marina,
located in Atlantic City, New Jersey.
o TCS. TCS, through a services agreement, provides to each of Plaza
Associates, Taj Associates and the Partnership certain central
management, financial and other functions and services necessary and
incidental to the respective operation of each of their casino hotels.
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3
<PAGE>
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ORGANIZATIONAL STRUCTURE
[Organizational chart of THCR and its subsidiaries is depicted here.]
[GRAPHIC OMITTED]
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4
<PAGE>
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THE EXCHANGE OFFER
The Exchange Offer ....... The Senior Note Issuers are offering to exchange up
to $62,000,000 aggregate principal amount of 10
1/4% Senior Secured Notes due 2003, Series B for
up to $62,000,000 aggregate principal amount of
its outstanding 10 1/4 Senior Secured Notes due
2003, Series A issued in reliance upon an
exemption from registration under the Securities
Act, and the TCHI Note Issuers are offering to
exchange up to $5,000,000 aggregate principal
amount of 10 1/4% Senior Secured Notes due 2003,
Series B for up to $5,000,000 aggregate principal
amount of its outstanding 10 1/4% Senior Secured
Notes due 2003, Series A issued in reliance upon
an exemption from registration under the
Securities Act. The terms of the Exchange Notes
will be substantially identical in all respects
(including principal amount, interest rate,
maturity and ranking) to the terms of the
Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that (i)
the Exchange Notes will be freely transferable by
Holders thereof except as provided herein (see
"The Exchange Offer--Terms of the Exchange" and
"The Exchange Offer--Terms and Conditions of the
Letter of Transmittal ") and (ii) the Exchange
Notes will be issued without any covenant
regarding registration under the Securities Act.
Exchange Notes issued pursuant to the Exchange Offer
in exchange for the Original Notes may be offered
for resale, resold and otherwise transferred by
Holders thereof (other than any Holder which is
(i) an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act,
(ii) a broker-dealer who acquired Original Notes
directly from the Issuer or (iii) broker-dealers
who acquired Original Notes as a result of market
making or other trading activities) without
compliance with the registration and prospectus
delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in
the ordinary course of such Holders' business and
such Holders are not engaged in, and do not
intend to engage in, and have no arrangement or
understanding with any person to participate in,
a distribution of such Exchange Notes.
Minimum Condition ........ The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Expiration Date .......... The Exchange Offer will expire at 5:00 p.m., New
York City time, on ____,1998 unless extended.
Exchange Date ............ The first date of acceptance for exchange for the
Original Notes will be the first business day
following the Expiration Date.
Conditions to the ........ The obligation of the Issuers to consummate the
Exchange Offer Exchange Offer is subject to certain conditions.
See "The Exchange Offer--Conditions to the
Exchange Offer." The Issuers reserve the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence
of any such condition.
Withdrawal Rights ........ Tenders may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense
to the tendering Holders thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
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5
<PAGE>
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Procedures for Tendering
Original Notes .......... See "The Exchange Offer--How to Tender."
Federal Income
Tax Consequences......... The exchange of Original Notes for Exchange Notes by
Holders will not be a taxable exchange for
federal income tax purposes, and Holders should
not recognize any taxable gain or loss or any
interest income as a result of such exchange.
Effect on Holders of
Original Notes .......... As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Original Notes pursuant to the term of
this Exchange Offer, the Issuers will have
fulfilled a covenant contained in the terms of
the Original Notes and the Registration Rights
Agreement (the "Registration Rights Agreement ")
dated as of April 17, 1998 between Funding, TCHI,
the Partnership and the funds listed therein,
and, accordingly, the holders of the Original
Notes will have no further registration or other
rights under the Registration Rights Agreement,
except under certain limited circumstances. See
"Original Notes Registration Rights." Holders of
the Original Notes who do not tender their
Original Notes in the Exchange Offer will
continue to hold such Original Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture, dated as
of April 17, 1998, among Funding, the
Partnership, the funds listed therein and U.S.
Bank National Association, as trustee (the
"Senior Note Trustee"), relating to the Senior
Original Notes and the Senior Exchange Notes (the
"Senior Note Indenture"), and the Indenture,
dated as of April 17, 1998, among TCHI, the
Partnership, the funds listed therein and U.S.
Bank National Association, as trustee (the "TCHI
Note Trustee" and, together with the Senior Note
Trustee, the "Trustee"), relating to the Original
TCHI Notes and the Exchange TCHI Notes (the "TCHI
Note Indenture" and, together with the Senior
Note Indenture, the "Note Indentures"), as
applicable. All untendered, and tendered but
unaccepted, Original Notes will continue to be
subject to the restrictions on transfer provided
for in the Original Notes and the Note
Indentures. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes
could be adversely affected. See "Risk
Factors--Consequences of Failure to Exchange."
TERMS OF THE NOTES
The Exchange Offer applies to $62,000,000 aggregate principal amount of
Senior Original Notes and $5,000,000 aggregate principal amount of Original TCHI
Notes. The form and terms of the Exchange Notes are the same as the form and
terms of the Original Notes for which they may be exchanged except that the
Exchange Notes will be registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Note Indentures. See "Description of the Senior Notes" and
"Description of the TCHI Notes."
SENIOR NOTES
Senior Note Issuer ....... Funding.
Senior Notes Offered ..... $62,000,000 aggregate principal amount of 10 1/4%
Senior Secured Notes due 2003.
Maturity Date ............ April 30, 2003.
Interest ................. 10 1/4% per annum, payable in cash, semi-annually
in arrears, calculated one basis of a 360-day
year consisting of twelve 30-day months.
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6
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Interest Payment Dates ... April 30 and October 31, commencing October 31,
1998.
Guarantor ................ The Senior Notes are fully and unconditionally
guaranteed on a senior basis by the Partnership.
Optional Redemption ...... All, but not less than all, of both the Senior Notes
and the TCHI Notes are redeemable concurrently at
any time at 100% of the principal amount thereof,
together with accrued and unpaid interest through
the date of redemption. In addition, the Notes
are subject at any time to redemption in
accordance with an order of a governmental
authority having jurisdiction over the
Partnership's casino license.
Sinking Fund ............. None.
Change of Control ........ Upon the occurrence of a Change in Control (as
defined in "Description of the Senior
Notes--Certain Covenants--Purchase of Senior
Notes Upon Change of Control"), each holder of
Notes may require the Issuers to repurchase such
holder's Notes at 101% of the principal amount
thereof, together with accrued and unpaid
interest and Liquidated Damages, if any, to the
date of repurchase.
Security ................. Funding's payment obligations under the Senior
Notes, and the guarantee thereof by the
Partnership, will be secured on a senior basis by
substantially all of the real and personal
property owned or leased by the Partnership. The
liens securing the Notes will be senior to the
liens securing the Mortgage Notes and the PIK
Notes.
Non-recourse ............. No direct or indirect stockholder, partner,
employee, officer or director, as such, past,
present or future, of the Issuers or any
successor entity shall have any personal
liability in respect of the obligations of the
Issuers under the Note Indentures, the Notes or
the guarantees thereof by reason of the status as
such stockholder, partner, employee, officer or
director except to the extent such party is an
Issuer.
Certain Covenants ........ The Senior Note Indenture contains certain covenants
which, among other things,
o limit the Partnership and its subsidiaries'
ability to incur certain indebtedness unless,
among other things, the Partnership's
Consolidated Fixed Charge Coverage Ratio (as
defined) for the four full fiscal quarters
immediately preceding such event, taken as
one period, would have been at least equal to
the ratios set forth in the Senior Note
Indenture, subject to certain exceptions;
o limit Funding, the Partnership and its
subsidiaries' ability to incur certain liens,
subject to certain exceptions;
o limit the making of certain dividends,
distributions and other restricted payments
by Funding, the Partnership and its
subsidiaries;
o restrict the Partnership and its subsidiaries
from engaging in certain leasing activities;
o limit the issuance of preferred stock by the
Partnership's subsidiaries;
o limit transactions by Funding, the
Partnership and its subsidiaries with
affiliates of Funding or the Partnership
(other than wholly owned subsidiaries);
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7
<PAGE>
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o restrict the disposition of assets or
property to the Partnership's subsidiaries;
o limit business or investment activities in
which the Partnership and its subsidiaries
may engage to those relating to Trump Marina;
o restrict the payment of a Services Fee (as
defined) under the Services Agreement (as
defined); and
o limit Funding and the Partnership's ability
to merge or sell all or substantially all of
their assets.
Events of Default ........ Events of Default include (i) default in payment of
interest when due for a period of 30 days; (ii)
default in payment of principal or premium, if
any, when due; (iii) default in the performance
or breach of certain specific covenants,
including those relating to merger or sale of
assets, failure to make or consummate a Change of
Control Offer or a required purchase of Mortgage
Notes or PIK Notes as required; (iv) default in
the performance or breach of certain other
covenants of Funding and the Partnership (other
than those specifically covered elsewhere in the
Senior Note Indenture) for 30 days after notice;
(v) certain events of bankruptcy, insolvency or
reorganization relating to Funding or the
Partnership or significant subsidiaries, which,
if involuntary, continue for 60 days; (vi)
revocation, suspension or loss of certain permits
resulting in a cessation of a substantial portion
of the operations of Trump Marina for more than
90 consecutive days; (vii) acceleration prior to
the maturity of certain indebtedness or the
default in the payment when due of certain
indebtedness of Funding, the Partnership or its
subsidiaries; (viii) the cessation of any
guarantee to be in full force and effect or
enforceable in accordance with its terms; and
(ix) certain events of default under the
documents governing the Mortgage Notes and the
PIK Notes. An Event of Default (as defined) under
the Senior Note Indenture could permit
acceleration of the TCHI Notes, the Mortgage
Notes and the PIK Notes and acceleration of
certain other existing or future indebtedness of
the Issuers and their affiliates under other
instruments that may contain cross-acceleration
or cross-default provisions. See "Risk
Factors--Restrictions on Certain Activities."
Modification of
Indenture ............... Amendments to the Senior Note Indenture are
permitted with the consent of the holders of not
less than a majority of the principal amount of
the outstanding Senior Notes; provided, however,
that the consent of all holders is required to
make certain changes, including those that would
change the time of payment of interest or
principal or reduce the principal amount or
interest rate payable on any Senior Note, reduce
the percentage in principal amount of outstanding
Senior Notes the consent of whose holders is
required for any modification or waiver, modify
the obligation of Funding or the Partnership to
make and consummate a Change of Control Offer,
modify any of the provisions regarding
modifications and amendments or the percentage of
the Senior Notes required for any waiver or,
except as permitted in the Senior Note Indenture,
consent to the assignment or transfer by Funding
or the Partnership of any of its rights and
obligations under the Senior Note Indenture.
Certain changes may be made without the consent
of the holders, for example to cure any
ambiguities in the documents that do not
adversely affect the rights of the holders.
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<PAGE>
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TCHI NOTES
TCHI Note Issuer ......... TCHI.
TCHI Notes Offered ....... $5,000,000 aggregate principal amount of 10 1/4%
Senior Secured Notes due 2003.
Guarantor ................ The TCHI Notes are fully and unconditionally
guaranteed on a senior basis by the Partnership.
Other .................... Terms The form and terms of the TCHI Notes are
substantially similar to the form and terms of
the Senior Notes. For additional information
regarding the Notes, see "Description of the
Senior Notes" and "Description of the TCHI
Notes."
Original Notes Registration Rights
Pursuant to the Registration Rights Agreement, the Issuers agreed (i) to
file a Registration Statement on or prior to July 17, 1998 with respect to the
Exchange Offer, (ii) to use its reasonable best efforts to cause such
Registration Statement to be declared effective under the Securities Act on or
prior to September 21, 1998 and (iii) upon the Registration Statement being
declared effective, to offer the Exchange Notes in exchange for surrender of the
Original Notes. In certain circumstances, the Issuers will be required to
provide a shelf registration statement (the "Shelf Registration Statement") to
cover resales of the Original Notes by the Holders thereof. If the Issuers do
not comply with their obligations under the Registration Rights Agreement, they
will be required to pay Liquidated Damages to Holders of the Original Notes
under certain circumstances. See "Original Notes Registration Rights."
Use of Proceeds
There will be no proceeds to the Issuers from the exchange pursuant to the
Exchange Offer. The proceeds from the issuance of the Original Notes were used
to redeem all of the issued and outstanding 11 1/2% Senior Notes due 2000 of
Funding (the "Old Senior Notes") at 100% of their principal amount, to repay the
Partnership's term loan with a bank (the "Term Loan") in full and for the
Partnership's general working capital requirements.
Risk Factors
See "Risk Factors" for a description of certain factors that should be
considered by participants in the Exchange Offer.
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9
<PAGE>
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SUMMARY FINANCIAL INFORMATION
Summary Pro Forma Financial Information
The following table sets forth certain unaudited pro forma financial
information of the Partnership (a) for the year ended December 31, 1997 and (b)
for the six months ended June 30, 1998. The results set forth for the interim
period are not necessarily indicative of the results for the full year. All
financial information should be read in connection with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated and condensed financial statements and the related notes thereto
all of which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma (1)
-------------
Year Ended Six Months
December 31, 1997 Ended June 30, 1998
----------------- -------------------
(dollars in thousands)
(Unaudited)
<S> <C> <C>
Statement of Operations Data:
Net Revenues ............................................... $ 284,676 $ 133,444
Depreciation and Amortization .............................. 17,089 8,198
Income from Operations ..................................... 21,516 11,998
Interest Expense, net ...................................... (49,416) (25,025)
Net Loss ................................................... (27,900) (13,027)
Other Data:
Deficiency in Earnings to Fixed Charges (2) ................ $ (27,900) $ (13,027)
EBITDA (3) ................................................. $ 40,006 $ 20,724
Balance Sheet Data (at end of period):(5)
Cash ....................................................... -- $ 19,148
Total Assets ............................................... -- 542,075
Total Long-Term Debt, Net of Current Maturities ............ -- 360,887(4)
Total Capital .............................................. -- 120,670
</TABLE>
- ----------
(1) The Pro Forma Statement of Operations Data and Other Data give effect to
the Exchange Offer as if the same had occurred as of the beginning of the
respective period.
(2) For the purposes of computing this ratio, earnings consist of income
(loss) before income taxes, extraordinary items, and fixed charges,
adjusted to exclude capitalized interest. Fixed charges consist of
interest expense, including amounts capitalized, and the portion of
operating lease rental expense that is representative of the interest
factor (deemed to be one-third of operating lease rental expense).
(3) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, non-operating income, and the noncash
write-down of the New Jersey Casino Reinvestment Development Authority
("CRDA") investments. EBITDA should not be construed as an alternative to
net income or any other measure of performance determined in accordance
with generally accepted accounting principles or as an indicator of the
Partnership's operating performance, liquidity or cash flows generated by
operating, investing and financing activities. Management has included
information concerning EBITDA as management understands that it is used
by certain investors as one measure of the Partnership's historical
ability to service its debt.
(4) Net of unamortized discount of $35,563.
(5) As the Senior Notes which will be exchanged for the existing notes are
identical in terms, actual and pro forma Balance Sheet Data are the same
as of June 30, 1998.
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10
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Summary Financial Information of the Partnership
The following table sets forth (a) certain historical consolidated
financial information of the Partnership for the years ended December 31, 1993,
1994, 1995, the period from January 1, 1996 through October 6, 1996, the period
from October 7, 1996 (the date of the Castle Acquisition) through December 31,
1996 and the year ended December 31, 1997 and (b) certain unaudited financial
information of the Partnership for the six months ended June 30, 1997 and 1998.
The results set forth for the interim period are not necessarily indicative of
the results for the full year. All financial information should be read in
connection with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated and condensed financial statements
and the related notes thereto all of which are included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------------------------------------
Period from Period from
January 1, October 7, Six Months
Years Ended December 31, 1996 through 1996 through Year Ended Ended June 30,
-------------------------------- October 6, December 31, December 31, --------------------
1993(1) 1994 1995 1996 1996(2) 1997 1997 1998
-------- -------- -------- -------- -------- -------- -------- --------
Predecessor Successor
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Revenue ............... $270,888 $281,553 $302,228 $214,727 $ 54,746 $284,676 $143,463 $133,444
Depreciation and
Amortization ............ 16,425 14,437 14,639 12,253 4,819 17,089(4) 8,725 8,198(4)
Income (Loss) from
Operations .............. 27,866 28,824 34,361 7,036 (2,467) 21,516(4) 11,114 11,998(4)
Other Income .............. -- -- -- 3,000 -- -- -- --
Interest Expense, net ..... 56,251 43,537 45,513 36,563 11,336 49,440 24,368 24,996
Net Loss .................. (28,385) (14,713) (11,152) (26,527) (13,803) (27,924)(4) (13,254) (12,998)(4)
Other Data:
EBITDA (3) ................ $ 45,359 $ 44,951 $ 50,656 $ 20,304 $ 2,710 $ 40,006 $ 20,415 $ 20,724
Capital Expenditures ...... 10,396 8,257 6,874 4,235 362 5,972 1,397 1,147
Balance Sheet Data
(at end of periods):
Total Assets .............. $375,935 $368,797 $370,581 $363,468 $548,011 $541,406 $549,759 $542,075
Total Long-Term Debt, net
of Current Maturities ... 309,794 314,433 323,015 330,665 335,584 341,343 335,923 360,887
Total Capital (Deficit) ... 31,678 16,965 5,813 (20,714) 166,592 133,668 148,338 120,670
Operating Data
(at end of period):
Casino Square Footage ..... 70,000 73,080 74,829 75,884 75,884 75,884 75,884 75,884
Number of Hotel Rooms ..... 725 725 728 728 728 728 728 728
Hotel Occupancy Rate ...... 88.0% 84.3% 88.5% 91.9% 84.0% 90.3% 86.3% 83.9%
</TABLE>
- ----------
(1) On December 28, 1993, the Partnership and its affiliated entities
consummated the Castle Recapitalization, which materially affects the
comparability of the information set forth above.
(2) Pursuant to the terms of the Agreement dated as of June 24, 1996, as
amended, between THCR Holdings and entities owned by Trump, THCR Holdings
acquired on October 7, 1996 all of the outstanding equity interest of the
Partnership. The Castle Acquisition has been accounted for as a purchase.
For his equity interest in the Partnership, Trump received a 15.33863%
limited partnership interest in THCR Holdings valued at $168,126,000, which
is exchangeable into 5,837,700 shares of THCR Common Stock. The excess of
the purchase price over the fair value of the net assets acquired of
$196,109,000 (including transaction costs, the purchase of the outstanding
TCHI warrants and the historical negative book value of the Partnership of
$20,714,000) has been recorded on the books of the Partnership and has been
allocated to property, plant and equipment based upon an appraisal. As a
result of the Castle Acquisition, a new basis of accounting was established
and financial statements prior to October 7, 1996 are presented as
Predecessor financial statements. The financial statements from October 7,
1996 are presented as Successor financial statements.
(3) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, non-operating income and non-cash write-down of
CRDA investments. EBITDA as presented may not be comparable to EBITDA as
defined and presented by other companies. EBITDA should not be construed as
an alternative to net income or any other measure of performance determined
in accordance with generally accepted accounting principles or as an
indicator of the Partnership's operating performance, liquidity or cash
flows generated by operating, investing and financing activities.
Management has included information concerning EBITDA, as
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management understands that it is used by certain investors as one measure
of the Partnership's historical ability to service its debt. The historical
consolidated Statements of Cash Flows includes the following cash flow
data:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------------
Period from Period from
January 1 October 7
1996 through 1996 through Year Ended Six Months
October 6, October 31, December 31, Ended June 30,
1993 1994 1995 1996 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Cash Flows Provided by
(Used in) Operating
Activities ....................... (9,081) 9,290 13,065 5,624 (7,190) 14,006 8,142 3,793
Net Cash Flows Used in
Investing Activities ............. (13,354) (10,607) (9,679) (6,378) (759) (9,245) (3,069) (2,686)
Net Cash Flows Provided by
(Used in) Financing
Activities ....................... 19,264 -- (1,470) (911) 3,956 (5,669) (4,120) (3,569)
</TABLE>
- ----------
(4) During the second quarter of 1997, the Partnership revised its estimates of
the useful lives of buildings, building improvements and furniture and
fixtures which were acquired in 1996. Buildings and building improvements
were reevaluated to have a forty year life and furniture and fixtures were
determined to have a five to seven year life. During 1997 and the six
months ended June 30, 1998, the net effect of applying these new lives was
to decrease the net loss by approximately $4,226,000 and $1,409,000,
respectively.
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12
<PAGE>
RISK FACTORS
In addition to the other information set forth elsewhere in this
Prospectus, before tendering their Original Notes for the Exchange Notes offered
hereby, Holders of Original Notes should consider carefully the following
factors, which may be generally applicable to the Original Notes as well as the
Exchange Notes. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Issuers' actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Prospectus.
High Leverage and Fixed Charges
The Partnership has a substantial amount of indebtedness on a consolidated
basis. At June 30, 1998, the Partnership's consolidated indebtedness for
borrowed money totaled approximately $362.8 million, principally representing
the Notes, the Mortgage Notes and the PIK Notes. The Partnership's ratio of
consolidated earnings to fixed charges was insufficient to cover fixed charges
by $13.0 million for the six months ended June 30, 1998. As of June 30, 1998,
the Partnership's debt to partner's capital ratio was 3.01.
In addition, the Partnership may incur up to an additional $5.0 million
under its Working Capital Facility (as defined in the indentures governing the
Mortgage Notes (the "Mortgage Note Indenture") and the PIK Notes (the "PIK Note
Indenture")). Obligations under the Working Capital Facility may be secured by
liens senior to the liens securing the Mortgage Notes and liens that are on a
pari passu basis with the liens securing the Notes. If the Partnership were to
draw down the additional $5.0 million available under the Working Capital
Facility, the aggregate principal amount of its indebtedness would be increased
by $5.0 million. As a result, its debt service burden would increase. At June
30, 1998, none of the Partnership's indebtedness is senior or pari passu to the
Senior Notes and the TCHI Notes.
Funding's ability to pay cash interest on the Senior Notes, the Mortgage
Notes and the PIK Notes and TCHI's ability to pay cash interest on the TCHI
Notes will be dependent upon the Partnership's ability to generate enough cash
from operations sufficient for such purposes. See "--Risk in Refinancing and
Repayment of Indebtedness; Need for Additional Financing."
The substantial consolidated indebtedness and fixed charges of the
Partnership may limit its ability to respond to changing business and economic
conditions, to fund capital expenditures for future expansion or otherwise,
either through cash flow or additional indebtedness, to absorb adverse operating
results or to maintain its facilities at an operating level that will continue
to attract patrons. Future operating results are subject to significant
business, economic, regulatory and competitive uncertainties and contingencies,
many of which are outside the Partnership's control. In addition, in the absence
of the Working Capital Facility, the Partnership may be unable to meet its
liquidity needs, which fluctuate due to the seasonality of the Partnership's
business.
Holding Company Structure
Funding has no material assets and TCHI is a holding company, the principal
asset of which is its partnership interest in the Partnership, and it has no
independent means of generating revenue. The Partnership's ability to make
payments to meet its cash needs may be restricted by, among other things, the
regulations of the New Jersey Casino Control Commission (the "CCC") and the
covenants contained in the Senior Note Indenture, the TCHI Note Indenture, the
Mortgage Note Indenture and the PIK Note Indenture.
Limitations On Ability To Realize On Collateral
If there is an Event of Default under the Note Indentures, the Senior Note
Mortgage, the TCHI Note Mortgage (together with the Senior Note Mortgage, the
"Note Mortgages"), the Senior Guarantee Mortgage or the TCHI Guarantee Mortgage
(together with the Senior Guarantee Mortgage, the "Guarantee Mortgages")
(collectively, the "Note Agreements"), the Senior Note Trustee and the TCHI Note
Trustee will have the right, subject to the requirements of the New Jersey
Casino Control Act and the regulations promulgated thereunder (the "Casino
Control Act"), to enforce the rights and remedies contained in the Note
Agreements. Because the Partnership Notes and the Guarantees are non-recourse
with respect to the partners of the Partnership and their assets, the
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Senior Note Trustee's and the TCHI Note Trustee's rights and remedies may be
exercised solely with respect to the assets subject to the lien of the Note
Agreements. Trump Marina may also be encumbered by the mortgages which would
secure the remaining $5 million Working Capital Facility, if obtained.
Accordingly, the net amount realized in any foreclosure sale for the benefit of
holders of the Notes will be only that amount which remains after payment of all
amounts then due and owing to creditors having security interests in the
collateral senior to the liens of the Note Mortgages and the Guarantee Mortgages
and certain taxes and other items. There can be no assurance that a foreclosure
on the Note Mortgages or the Guarantee Mortgages would produce proceeds in an
amount that would be sufficient to pay the principal of, and accrued interest
on, the Notes.
Certain Regulatory Considerations. No person can hold a casino license in
the State of New Jersey unless found qualified to do so by the CCC. If the
Senior Note Trustee or the TCHI Note Trustee sought to acquire collateral
relating to an ongoing casino operation in a foreclosure sale or otherwise, the
Senior Note Trustee or the TCHI Note Trustee, as applicable, would be required
to comply with the licensing requirements of the Casino Control Act, including
the requirement that it hold a casino license.
The Senior Note Trustee or the TCHI Note Trustee would be required to make
application to the CCC for interim casino authorization before it acquires such
assets. If interim casino authorization is denied, the Senior Note Trustee or
the TCHI Note Trustee, as applicable, would not be permitted to acquire such
assets. If interim casino authorization is granted, the Senior Note Trustee or
the TCHI Note Trustee, as applicable, could acquire such assets subject to an
interim casino authorization trust. If casino licensure is subsequently granted,
the interim casino authorization trust would no longer be operative, and the
Senior Note Trustee or the TCHI Note Trustee, as applicable, would be permitted
to acquire such assets. If casino licensure is thereafter denied, the interim
casino authorization trustee would be required to dispose of all property
subject to the interim casino authorization trust.
In addition, in any foreclosure sale or subsequent resale by the Senior
Note Trustee or the TCHI Note Trustee, licensing requirements under the Casino
Control Act may limit the number of potential bidders and may delay any sale,
either of which events could have an adverse effect on the sale price of such
collateral. See "Business--Gaming and Other Laws and Regulations."
Certain Bankruptcy Limitations. The right of the Senior Note Trustee and
the TCHI Note Trustee under the Note Agreements to repossess and dispose of the
collateral upon the occurrence of an event of default on the Notes is likely to
be significantly impaired by applicable bankruptcy law if a bankruptcy
proceeding were to be commenced by or against TCHI, Funding or the Partnership
prior to the Senior Note Trustee's or the TCHI Note Trustee's, as applicable,
having repossessed and disposed of the collateral. Under applicable bankruptcy
law, secured creditors such as the holders of the Notes are prohibited from
repossessing their security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without bankruptcy court
approval. Moreover, applicable bankruptcy law permits the debtor to continue to
retain and to use collateral even though the debtor is in default under the
applicable debt instruments, provided that the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the secured creditor's interest in the collateral and may include cash
payments or the granting of additional security, if and at such times as the
court in its discretion determines, for any diminution in the value of the
collateral as a result of the stay of repossession or disposition or any use of
the collateral by the debtor during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term "adequate protection" and the
broad discretionary powers of a bankruptcy court, it is impossible to predict
how long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Senior Note Trustee or the TCHI Note
Trustee, as applicable, could repossess or dispose of the collateral or whether
or to what extent holders of the Notes would be compensated for any delay in
payment or loss of value of the collateral through the requirement of "adequate
protection."
Risk in Refinancing and Repayment of Indebtedness; Need for Additional Financing
The ability of Funding and TCHI, as applicable, to pay the principal of the
Senior Notes, the TCHI Notes, the Mortgage Notes and the PIK Notes when due will
depend upon either the Partnership's ability to generate cash from operations
sufficient for such purpose or to refinance such indebtedness on or before the
date on which it becomes due. The Partnership does not currently anticipate
being able to generate sufficient cash flow from its operations to repay a
substantial portion of the principal amount of the Senior Notes, the TCHI Notes,
the Mortgage
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Notes and the PIK Notes at maturity. Thus, the repayment of the Senior Notes,
the TCHI Notes, the Mortgage Notes and the PIK Notes is likely to be dependent
primarily upon the ability to refinance the Senior Notes, the TCHI Notes, the
Mortgage Notes and the PIK Notes when due. The Partnership's future operating
performance and ability to refinance the Senior Notes, the TCHI Notes, the
Mortgage Notes and the PIK Notes will be subject to the then prevailing economic
conditions, industry conditions and numerous other financial, business and other
factors, many of which are beyond the control of the Partnership, Funding or
TCHI. There can be no assurance that the future operating performance of the
Partnership will be sufficient to meet these repayment obligations or that the
general state of the economy, the status of the capital markets generally or the
receptiveness of the capital markets to the gaming industry and to the
Partnership will be conducive to refinancing the Senior Notes, the TCHI Notes,
the Mortgage Notes and the PIK Notes or other attempts to raise capital. The
Mortgage Notes and the PIK Notes are expressly subordinated to the indebtedness
of the Senior Notes and the TCHI Notes.
Risks Associated with a Change of Control
The Senior Note Indenture and the TCHI Note Indenture contain provisions
relating to certain changes of control of TCHI, Funding and the Partnership.
Upon the occurrence of any such change of control, the Issuers would be
obligated to make an offer to purchase all of the Notes then outstanding at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. The Mortgage Note Indenture and the PIK
Note Indenture contain comparable provisions. There can be no assurance that
funds necessary to effect such a purchase would be available if such an event
were to occur. See "Description of the Senior Notes."
Restrictions on Certain Activities
The Senior Note Indenture, the TCHI Note Indenture, the Mortgage Note
Indenture and the PIK Note Indenture impose restrictions on the ability of
Funding, the Partnership and TCHI. Generally, these restrictions relate to the
incurrence of additional indebtedness, the distribution of cash and/or property
to the Partnership's partners and the repayment or repurchase of pari passu or
junior securities, investments, mergers and sales of assets and the creation of
liens. These restrictions could limit the ability of the Partnership to respond
to changing business and economic conditions. A failure to comply with any of
these obligations could also result in an Event of Default under the Senior Note
Indenture, the TCHI Note Indenture, the Mortgage Note Indenture or the PIK Note
Indenture, which could permit acceleration of the Senior Notes, the TCHI Notes,
the Mortgage Notes or the PIK Notes. In addition, additional borrowings under
the Working Capital Facility could contain affirmative and negative covenants
customary to loan documentation for highly leveraged companies, which covenants
could be more restrictive than those contained in the Senior Note Indenture, the
TCHI Note Indenture, the Mortgage Note Indenture and the PIK Note Indenture.
Risks Associated with Use of Proceeds
The proceeds from the issuance of the Original Notes were used to redeem
all of the issued and outstanding Old Senior Notes at 100% of their principal
amount, to repay the Term Loan in full and for the Partnership's general working
capital requirements. The Partnership, Funding and TCHI will not receive any
proceeds from the offering of the Exchange Notes.
Reliance Upon Partnership Notes for Payments on the Notes
TCHI will be entirely dependent upon payments with respect to the Senior
Partnership Upstream Note (the "Senior Partnership Upstream Note") issued by the
Partnership in favor of TCHI to provide a source for the payment of principal
of, premium, if any, or interest on the TCHI Notes. Funding will be entirely
dependent upon payments with respect to the Senior Partnership Note (the "Senior
Partnership Note") issued by the Partnership in favor of Funding to provide a
source for the payment of principal of, premium, if any, or interest on the
Senior Notes. As a result, TCHI and Funding may be unable to gain access to the
cash flow or assets of the Partnership in an amount sufficient to pay interest
on the TCHI Notes and the Senior Notes, as applicable, in cash and to pay the
principal of, or premium, if any, on the TCHI Notes and the Senior Notes, as
applicable, when due.
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Historical Results; Past Net Losses
The Partnership. The Partnership had net losses of $28.4 million, $14.7
million, $11.2 million, $40.3 million and $27.9 million for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, respectively, and a net loss of
$13.0 million for the six months ended June 30, 1998. The Partnership had a
working capital deficit of $2.1 million, $1.0 million, $0.6 million, $14.3
million and $34.4 million at December 31, 1993, 1994, 1995, 1996 and 1997 and
$23.9 million at June 30, 1998, respectively.
1992 and 1993 Recapitalizations. On May 29, 1992, TCI-II, Funding and the
Partnership restructured their indebtedness through a prepackaged plan of
reorganization under Chapter 11 of the Bankruptcy Code to alleviate certain
liquidity problems (attributable, in part, to the overall deterioration in the
Atlantic City Market experienced prior to such time, aggravated by an economic
recession in the Northeast and the Persian Gulf War), to improve the
amortization schedule and to extend the maturity of the Partnership's
indebtedness (the "Plan"). In December 1993, the Partnership, Funding and
certain affiliated entities completed a recapitalization of their debt and
equity capitalization (the "Castle Recapitalization"). The purpose of the Castle
Recapitalization was (i) to improve the debt capitalization of the Partnership
and, initially, to decrease its cash charges, (ii) to provide the holders of the
units (comprised of $1,000 principal amount of Funding's 9 1/2% Mortgage Bonds
due 1998 and one share of TCI-II's common stock (collectively, the "Units")) who
participated in the exchange offer in connection with the Castle
Recapitalization with a cash payment of $6.19 and securities having a combined
principal amount of $905 for each Unit and (iii) to provide Trump with
beneficial ownership of 100% of the common equity interests in the Partnership
(subject to the rights of holders of the Castle Warrants).
As a result of the Castle Recapitalization, TCI-II had a 37.5% equity
interest in the Partnership, Trump had a 61.5% equity interest in the
Partnership and TCHI had a 1% equity interest in the Partnership; accordingly,
through his ownership of 100% of TCI-II and TCHI, Trump was the beneficial owner
of 100% of the equity interests in the Partnership (subject to the rights of the
holders of the Castle Warrants). Also as a consequence of the Castle
Recapitalization, the principal amount of the Partnership's debt was reduced,
and, initially, the Partnership's cash charges were reduced. Upon the
consummation of the Castle Recapitalization, the Partnership's outstanding debt,
on a consolidated basis, consisted of the $38 million outstanding on the Term
Loan, $27 million principal amount outstanding of its Old Senior Notes, the
approximately $242 million principal amount outstanding of the Mortgage Notes
and the approximately $50 million principal amount outstanding of the PIK Notes.
PIK Note Acquisition. On June 23, 1995, the Partnership entered into an
agreement with Hamilton Partners, L.P. ("Hamilton") which granted the
Partnership an option (the "Option") to acquire the PIK Notes owned by Hamilton
(the "Option Agreement"). The Option was granted to the Partnership in
consideration of $1.9 million of aggregate payments to Hamilton. The Option was
exercisable at a price equal to 60% of the aggregate principal amount of the PIK
Notes delivered by Hamilton, with accrued but unpaid interest, plus 100% of the
PIK Notes issued to Hamilton as interest subsequent to June 23, 1995. Pursuant
to the terms of the Option Agreement, upon the occurrence of certain events
within 18 months of the time the Option is exercised, the Partnership was
required to make an additional payment to Hamilton of up to 40% of the principal
amount of the PIK Notes. On May 21, 1996, the Partnership assigned the Option to
THCR Holdings, which, on that same date, exercised the Option and acquired
approximately 90% of the then outstanding PIK Notes for approximately $38.7
million, in exchange for which THCR Holdings received an aggregate of
approximately $59.3 million principal amount of PIK Notes.
Castle Acquisition. On October 7, 1996, THCR Holdings acquired from Trump
all of the outstanding equity of the Partnership. The following transactions
were effected in connection with the Castle Acquisition:
(i) Trump contributed to THCR Holdings his 61.5% equity interest in
the Partnership, in consideration of which he received a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares
of THCR's Common Stock, par value $.01 per share (the "THCR Common Stock")
(valuing each such share at $30.00 (the "THCR Stock Contribution Value"));
(ii) TCI-II contributed to THCR Holdings its 37.5% equity interest in
the Partnership in consideration of which it received a 5.81009% limited
partnership interest in THCR Holdings, exchangeable into 2,211,250 shares
of THCR Common Stock (valuing each such share at the THCR Stock
Contribution Value); and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and a wholly
owned subsidiary of THCR Holdings ("Castle Merger Sub"), merged (the "TCHI
Merger") with and into TCHI (holder of a 1% equity interest in the
Partnership) whereupon (x) each share of TCHI Common Stock outstanding
immediately prior
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to the TCHI Merger was converted into the right to receive $.8845 in cash
(the "TCHI Consideration") and each share of common stock of Castle Merger
Sub was converted into the right to receive one share of common stock of
the surviving corporation of the TCHI Merger and (y) each holder of the
Castle Warrants issued under a warrant agreement, dated as of December 30,
1993, between TCHI and First Bank National Association, now known as U.S.
Bank National Association, as warrant agent, became entitled to receive,
for each former share of TCHI Common Stock for which each Castle Warrant
was exercisable, an amount in cash equal to the TCHI Consideration.
In the aggregate, Trump received (i) a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock and (ii)
$884,550 in cash. On October 7, 1996, the closing sale price of the THCR Common
Stock on the New York Stock Exchange was $22.625 per share.
As a result of the Castle Acquisition, on October 7, 1996, THCR's and
Trump's beneficial equity interest in THCR Holdings was approximately 63.4% and
36.6%, respectively, and Trump's beneficial equity interest in THCR Holdings was
exchangeable into 13,918,723 shares of THCR Common Stock. The Castle Acquisition
was approved by the stockholders of THCR on September 30, 1996.
April 1998 Refinancing. On April 17, 1998, the Partnership, Funding and
TCHI refinanced the Old Senior Notes and the Term Loan by issuing the Senior
Notes and the TCHI Notes. The proceeds from the issuance of the Senior Notes and
the TCHI Notes were used to redeem all of the issued and outstanding Old Senior
Notes at100% of their principal amount, to repay the Term Loan in full and for
the Partnership's general working capital requirements.
Control and Involvement of Trump
Trump's Substantial Voting Power. Through his beneficial ownership of
THCR's Class B Common Stock, par value $.01 per share (the "THCR Class B Common
Stock"), Trump exercises considerable influence over the affairs of THCR and
controls approximately 38.2% of the total voting power of THCR. Management
believes that the involvement of Trump in the affairs of THCR is an important
factor that will affect the prospects of the Partnership. Following the offering
of the Exchange Notes, Trump will continue to pursue, develop, control and
conduct all of his gaming business through THCR.
Reliance on Trump. Management believes that Trump's financial condition and
general business success, together with the public's perception of such success,
may be relevant to the success of the Partnership, due in part to the marquee
value of the "Trump" name, even though Trump has no obligation to contribute
funds to THCR, THCR Holdings or the Partnership and is not providing any
personal guarantees in connection with the Exchange Offer. The association of
the "Trump" name with high quality amenities and first class service at Trump
Marina could be diminished in the event that Trump experienced business
reversals or the public perceived such reversals, and, accordingly, the value of
a holder's Notes could be adversely affected. Moreover, if the CCC at any time
finds Trump to be financially unstable under the Casino Control Act, the CCC is
authorized to take any necessary public action to protect the public interest,
including the suspension or revocation of the casino license of the Partnership.
As security for certain of his personal indebtedness, Trump has pledged, and
caused Trump Casinos, Inc. ("TCI") to pledge, all of their interests in THCR and
THCR Holdings. In the event that Trump is unable to pay such indebtedness when
due, subject to applicable regulatory approval, such lenders would have the
right to foreclose on the pledged THCR Class B Common Stock and the pledged
limited partnership interests in THCR Holdings and cause such limited
partnership interests to be converted into shares of THCR Common Stock, and to
have such shares registered for resale under the Securities Act of 1933, as
amended.
Competition
The Atlantic City Market. Competition in the Atlantic City casino hotel
market is intense. Trump Marina, Trump Plaza and the Taj Mahal (collectively,
the "Atlantic City Properties") compete with each other and with other casino
hotels located in Atlantic City. Trump Plaza and the Taj Mahal are wholly owned
by THCR Holdings, the parent of the Partnership. At present, there are 12 casino
hotels located in Atlantic City, including the Atlantic City Properties, all of
which compete for patrons. In addition, there are several sites on The Boardwalk
and in the Marina District on which casino hotels could be built in the future
and various applications for casino licenses have
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been filed and announcements with respect thereto made from time to time
(including a casino resort by Mirage Resorts Incorporated ("Mirage") to be built
in the Marina District and a casino resort by MGM Grand, Inc. to be built on The
Boardwalk), although management is not aware of any current construction on such
sites by third parties. Substantial new expansion and development activity has
recently been completed or has been announced in Atlantic City, including the
expansion at Harrah's, Hilton, Caesar's, Resorts, Tropicana and Bally's Wild
West Casino, which intensifies competitive pressures in the Atlantic City
Market. While management believes that the addition of hotel capacity would be
beneficial to the Atlantic City Market generally, there can be no assurance that
such expansion would not be materially disadvantageous to the Atlantic City
Properties. There also can be no assurance that the Atlantic City development
projects which are planned or underway will be completed.
Total Atlantic City gaming revenues have increased in each of the past five
years. The following table illustrates this growth in gaming revenues as well as
the growth in the number of table games and slot machine units during the past
five years:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gross Gaming Revenue
(dollars in thousands) ............. $3,301,367 $3,432,953 $3,759,220 $3,825,312 $3,917,847
Increase from Prior Year ......... 2.6% 4.0% 9.5% 1.8% 2.4%
Number of Table Games ................ 1,243 1,305 1,307 1,377 1,460
Increase from Prior Year ......... 4.3% 5.0% 0.2% 5.4% 6.0%
Number of Slot Machines .............. 24,187 25,893 28,462 31,496 33,799
Increase from Prior Year ......... 7.7% 7.1% 9.9% 10.7% 7.3%
</TABLE>
The Partnership also competes, or will compete, with facilities in the
northeastern and mid-Atlantic regions of the United States at which casino
gaming or other forms of wagering are currently, or in the future may be,
authorized. To a lesser extent, the Partnership faces competition from gaming
facilities nationwide, including land-based, cruise line, riverboat and dockside
casinos located in Colorado, Illinois, Indiana, Iowa, Louisiana, Mississippi,
Missouri, Nevada, South Dakota, Ontario (Windsor and Niagara Falls), the
Bahamas, Puerto Rico and other locations inside and outside the United States,
and from other forms of legalized gaming in New Jersey and in its surrounding
states such as lotteries, horse racing (including off-track betting), jai alai,
bingo and dog racing, and from illegal wagering of various types. New or
expanded operations by other persons can be expected to increase competition and
could result in the saturation of certain gaming markets. In September 1995, New
York introduced a keno lottery game, which is played on video terminals that
have been set up in approximately 1,800 bars, restaurants and bowling alleys
across the state. Bay Casino is operating a gambling cruise ship where patrons
are taken from a pier in Sheepshead Bay in Brooklyn, New York to international
waters to gamble. In September 1997, another gambling cruise ship was launched
off the coast of Montauk, New York. On April 24, 1998, Freeport Casino Cruises
began operating a gambling ship in Long Island, New York. Manhattan Cruises, a
company offering gambling cruises departing from Manhattan, New York City since
January 28, 1998, suspended operations in early May 1998, but has announced
plans to resume operations shortly. Other companies (including SeaEscape Casino
Cruises, South Shore Cruise Lines, President Casino and Circle Line) are
currently seeking permission to operate similar cruises in the New York City
area. On December 5, 1997, the mayor of New York City proposed the construction
of a casino on Governors Island, located in the middle of New York Harbor;
however, the proposal would require an amendment to the New York State
Constitution and the sale of the island to New York by the federal government.
In Delaware, a total of approximately 2,000 slot machines were installed at 3
horse racetracks in 1996 and the Delaware legislature recently approved a bill
which would more than double the number of slot machines allowed at the three
racetracks. These slot machines are expected to become operational during the
third quarter of 1998. West Virginia also permits slot machines at racetracks,
and track owners in several other states, including Maryland and Pennsylvania,
are seeking to do the same. In December 1996, the temporary Casino Niagara
opened in Niagara Falls, Ontario. Ontario officials expect that two-thirds of
Casino Niagara's patrons will come from the United States, predominantly from
western New York. In February 1998, the Ontario Casino Commission designated a
consortium whose principal investor is Hyatt Hotels Corporation as the preferred
developer of the permanent Casino Niagara. Moreover, the Partnership may also
face competition from various forms of internet gambling.
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In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, the Partnership competes directly with Trump Plaza and the Taj
Mahal for gaming patrons.
Other Competition. In addition, the Partnership faces competition in a
number of states from casino facilities operated by federally recognized Native
American tribes. Pursuant to the Indian Gaming Regulatory Act ("IGRA"), which
was passed by Congress in 1988, any state which permits casino-style gaming
(even if only for limited charity purposes) is required to negotiate gaming
compacts with federally recognized Native American tribes. Under IGRA, Native
American tribes enjoy comparative freedom from regulation and taxation of gaming
operations, which provides them with an advantage over their competitors,
including the Atlantic City Properties. In March 1996, the United States Supreme
Court struck down a provision of IGRA which allowed Native American tribes to
sue states in federal court for failing to negotiate gaming compacts in good
faith. Management cannot predict the impact of this decision on the ability of
Native American tribes to negotiate compacts with states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods Casino Resort
("Foxwoods"), a casino facility in Ledyard, Connecticut, located in the far
eastern portion of such state, an approximately three-hour drive from New York
City and an approximately two and one-half hour drive from Boston, which
currently offers 24-hour gaming and contains over 5,500 slot machines. An
ongoing expansion at Foxwoods, due to be completed in April 1998, will include
an indoor arena, additional hotel rooms, restaurants and retail stores. Foxwoods
also plans to begin operating a high speed ferry between New York City and its
casino. The Mashantucket Pequot Nation has also announced plans for a high speed
train linking Foxwoods to the interstate highway and an airport outside
Providence, Rhode Island. In addition, in October 1996, the Mohegan Nation
opened the Mohegan Sun Resort in Uncasville, Connecticut, located 10 miles from
Foxwoods. Developed by Sun International Hotel, Ltd., the Mohegan Sun Resort has
75% of the gaming capacity of Foxwoods. The Mohegan Nation has announced plans
for an expansion of the casino facilities and the construction of a hotel,
convention center and entertainment center to be completed by the year 2000. In
addition, the Eastern Pequots are seeking formal recognition as a Native
American tribe for the purpose of opening a casino in the North Stonington area.
There can be no assurance that any continued expansion of gaming operations of
the Mashantucket Pequot Nation, the gaming operations of the Mohegan Nation or
the commencement of gaming operations by the Eastern Pequots would not have a
materially adverse impact on the operations of the Partnership. See
"Business--Competition--Other Competition."
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including Maryland and those states bordering
New Jersey. Six states have presently legalized riverboat gambling while others
are considering its approval, including New York and Pennsylvania. Several
states are considering or have approved large scale land-based casinos.
Additionally, since 1993, the gaming space in Las Vegas has expanded
significantly, with additional capacity planned and currently under
construction. The operations of the Partnership could be adversely affected by
such competition, particularly if casino gaming were permitted in jurisdictions
near or elsewhere in New Jersey or in other states in the Northeast. In December
1993, the Rhode Island Lottery Commission approved the addition of slot machine
games on video terminals at Lincoln Greyhound Park and Newport Jai Alai, where
poker and blackjack have been offered for over three years. Currently, casino
gaming, other than Native American gaming, is not allowed in other areas of New
Jersey or in Connecticut, New York or Pennsylvania. On November 17, 1995, a
proposal to allow casino gaming in Bridgeport, Connecticut was voted down by
that state's Senate. On January 28, 1997, the New York State Senate rejected a
constitutional amendment to legalize casino gambling in certain areas of New
York State, effectively postponing any new gambling constitutional amendment
until 1999. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, proposals have been introduced to legalize gaming (including
keno) in other locations, including Philadelphia, Pennsylvania. In addition,
legislation has from time to time been introduced in the New Jersey State
Legislature relating to types of statewide legalized gaming, such as video games
with small wagers. To date, no such legislation, which may require a state
constitutional amendment, has been enacted. Management is unable to predict
whether any such legislation, in New Jersey or elsewhere, will be enacted or
whether, if passed, would have a material adverse impact on the Partnership.
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Reliance on Key Personnel
The ability of the Partnership to operate successfully is dependent, in
part, upon the continued services of certain of its employees, including
Nicholas L. Ribis, the President and Chief Executive Officer of THCR and the
Chief Executive Officer of THCR Holdings. Mr. Ribis' employment agreement with
THCR and THCR Holdings expires on June 12, 2000 (subject to earlier termination
upon the occurrence of certain events). There can be no assurance that a
suitable replacement for Mr. Ribis could be found in the event of a termination
of his employment. A shortage of skilled management-level employees currently
exists in the gaming industry which may make it difficult and expensive to
attract and retain qualified employees.
Strict Regulation by Gaming Authorities
The ownership and operation of the gaming-related business of the
Partnership is subject to strict state regulation under the Casino Control Act.
The Partnership and their various officers and other qualifiers have received
the licenses, permits and authorizations required to operate Trump Marina.
Failure to maintain or obtain the requisite casino licenses would have a
material adverse effect on the Partnership. In June 1995, the CCC renewed the
Partnership's casino license and approved Trump as a natural person qualifier
through May 1999, subject to revocation or suspension upon the occurrence of
certain events. This license is not transferable and its renewal will include a
financial review of the Partnership. No assurance can be given as to the term
for which the CCC will renew this license or as to what license conditions, if
any, may be imposed by the CCC in connection with any future renewal.
The Casino Control Act imposes substantial restrictions on the ownership of
securities of the Partnership, Funding and TCHI. A holder of Senior Notes or
TCHI Notes may be required to meet the qualification provisions of the Casino
Control Act relating to financial sources and/or security holders. The Senior
Note Indenture and the TCHI Note Indenture provide that if the CCC requires a
holder of securities (whether the record or beneficial owner) to qualify under
the Casino Control Act and such holder does not so qualify, then such holder
must dispose of his interest in the Senior Notes or the TCHI Notes within 30
days after receipt by Funding or TCHI, as applicable, of notice of such finding
that such holder does not so qualify, or Funding or TCHI, as applicable, may
redeem such Senior Notes or TCHI Notes at the lower of the outstanding principal
amount or their value calculated as if the investment had been made on the date
of disqualification of such holder (or such lesser amount as may be required by
the CCC). If a holder is found unqualified by the CCC, it is unlawful for the
holder (i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities or (ii) to receive any dividends or interest upon
such securities or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
Taxes and Fees
The Partnership's current gaming operations are, and any future gaming
operations are likely to be, subject to significant taxes and fees in addition
to normal federal and state corporate income taxes, and such taxes and fees are
subject to increase at any time. Any material increase in these taxes or fees
would adversely affect the Partnership. For a further discussion of these taxes
and fees, see "Business--Gaming and Other Laws and Regulations--New Jersey
Gaming Regulations."
Limitations on License of the Trump Name
Subject to certain restrictions, THCR has the exclusive right to use the
"Trump" name and likeness in connection with gaming and related activities
pursuant to a trademark license agreement between Trump and THCR (the "License
Agreement"). THCR's rights under the License Agreement are secured by a security
interest in the names "Trump," "Donald Trump" and "Donald J. Trump" (including
variations thereon, the "Trump Names") and related intellectual property rights
(collectively, the "Marks") for use in connection with casino services, pursuant
to a security agreement (the "Trademark Security Agreement"). If there were a
default under the License Agreement or the Trademark Security Agreement, THCR
would have rights, subject to the requirements of
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applicable state law, to enforce the rights and remedies contained in the
Trademark Security Agreement. In the event of a foreclosure sale of the Marks,
the net amount realized in such sale by THCR might not yield the full amount of
damages that THCR could sustain as a result of the default. In addition, the
existence of rights of others to the use of the Trump Names, including pursuant
to any security interests in trademarks for non-gaming hotels, could adversely
affect the ability of THCR to realize the benefits of the Trademark Security
Agreement. THCR's right to repossess and dispose of the Marks upon a breach of
the License Agreement may be significantly impaired if the owner of the Marks
were to become the subject of a case under the United States Bankruptcy Code
(the "Bankruptcy Code") prior to THCR's having repossessed and disposed of the
Marks. Under the Bankruptcy Code, secured creditors, such as THCR, are
automatically stayed from repossessing or disposing of their collateral without
bankruptcy court approval. Moreover, the Bankruptcy Code permits a defaulting
debtor to retain and continue to use the collateral if the secured creditor is
given "adequate protection" of its interest in the collateral. Such adequate
protection under the Bankruptcy Code may take various forms, including the
granting of a replacement lien or other relief that will enable the secured
creditor to realize the "indubitable equivalent" of its interest in the
collateral. Accordingly, it is impossible to predict whether or when THCR would
repossess or dispose of the Marks, or whether or to what extent THCR would then
be compensated for any delay in payment or loss of value of the Marks through
the requirement of "adequate protection" if the owner of the Marks were to
become the subject of a bankruptcy or reorganization case. Furthermore, the
License Agreement could be rejected in connection with a bankruptcy of the
licensor if, in the business judgment of a trustee or the licensor, as
debtor-in-possession, rejection of the contract would benefit the licensor's
estate. In the event of such rejection, THCR could assert a claim for damages,
secured by THCR's lien on the Marks.
Seasonal Nature of Revenues and Cash Flow
The gaming industry in Atlantic City is seasonal in nature, with the
heaviest activity occurring during the period from May through September.
Consequently, the Partnership's operating results during the two quarters ending
in March and December would not likely be as profitable as the two quarters
ending in June and September.
Risks Related to Creditworthiness of Patrons
The Partnership's casino games are conducted on a credit as well as a cash
basis. Gaming debts arising in Atlantic City in accordance with applicable
regulations are enforceable in the courts of the State of New Jersey. The
extension of gaming credit is subject to regulations that detail procedures
which casinos must follow when granting gaming credit and recording counter
checks which have been exchanged, redeemed or consolidated. Trump Marina is
exposed to certain risks related to the creditworthiness of its patrons.
Historically, Trump Marina has extended credit on a discretionary basis to
certain qualified patrons. For the years ended December 31, 1995, 1996 and 1997,
Trump Marina's credit play as a percentage of total dollars wagered was
approximately 30.0%, 31.4% and 32.4%, respectively. As part of Trump Marina's
business strategy, Trump Marina has imposed stricter standards on applications
for new or additional credit. In 1997, 3% of receivables at Trump Marina were
due from non-United States patrons. The provision for losses from gaming credit
were $1.4 million, $1.4 million and $1.5 million for the years ended December
31, 1995, 1996 and 1997, respectively, which approximated 0.9%, 0.9% and 0.9% of
the credit issued, respectively. There can be no assurance that defaults in the
repayment of credit by patrons of Trump Marina could not have a material adverse
effect on the results of operations of Trump Marina.
Failure to File Currency Transaction Reports
The United States Department of the Treasury (the "Treasury") has adopted
regulations pursuant to which a casino is required to file a report of each
deposit, withdrawal, exchange of currency, gambling tokens or chips, or other
payments or transfers by, through or to such casino which involves a transaction
in currency of more than $10,000 per patron, per gaming day (a "Currency
Transaction Report"). Such reports are required to be made on forms prescribed
by the Secretary of the Treasury and are filed with the Internal Revenue
Service. In addition, the Partnership is required to maintain detailed records
(including the names, addresses, social security numbers and other information
with respect to its gaming customers) dealing with, among other items, the
deposit and
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withdrawal of funds and the maintenance of a line of credit. Failure to comply
with these regulations could result in civil or criminal penalties, as specified
in the applicable regulations, being assessed against the Partnership or
officers and employees of the Partnership.
Fraudulent Transfer Considerations
The obligations of the Partnership under its guarantee of the Notes, as
well as the security interest granted by the Partnership in its assets to secure
the Notes and its guarantee, may be subject to review under state or federal
fraudulent transfer laws in the event of the bankruptcy or other financial
difficulty of the Partnership. In the event that a court were to find that at
the time the Partnership incurred such obligations or granted such security
interest, it (a) did so with actual intent to hinder, delay or defraud its
creditors or (b) did not receive reasonably equivalent value or fair
consideration therefor, and either (i) was insolvent, (ii) was rendered
insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, such court could avoid the Partnership's obligations
under its guarantee, as well as the security interests securing such guarantee,
and direct the return of any amounts paid under such guarantee to the
Partnership or to a fund for the benefit of its creditors.
Among other things, a court might conclude that the Partnership did not
receive reasonably equivalent value or fair consideration for its guarantee to
the extent that the economic benefits realized by it in the Initial Offering
(including the payment of its outstanding obligations) were less than the
aggregate amount of its liability under its guarantee.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
would be required to pay its probable liability on its existing debts as they
become absolute and matured.
Forward-Looking Statements
Certain statements contained herein, including without limitation,
statements containing the words "believes," "anticipates," "intends," "will,"
"expects" and words of similar import, constitute "forward-looking statements."
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of THCR, THCR Holdings, the Partnership, Funding or TCHI, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, both
domestic and foreign; demographic changes; existing government regulations and
changes in, or the failure to comply with, government regulations; legislative
proposals; liability and other claims asserted against THCR, THCR Holdings, the
Partnership, Funding or TCHI; competition in the gaming industry; changes in
operating strategy or expansion and development plans; the ability to attract
and retain qualified personnel; the availability and terms of capital to fund
the expansion of THCR's, THCR Holdings', the Partnership's, Funding's or TCHI's
business; and other factors referenced herein. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. Each of THCR, THCR Holdings, Funding, TCHI and the
Partnership disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments. All forward-looking
statements are expressly qualified by such cautionary statements.
Lack of Public Market for the Exchange Notes
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of Holders of
Exchange Notes to sell their Exchange Notes or (iii) the price at which the
Holders of Exchange Notes would be able to sell
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their Exchange Notes. If such a market were to exist, the Exchange Notes could
trade at prices that may be higher or lower than their principal amount or
purchase price, depending on many factors, including prevailing interest rates,
the market for similar notes and the financial performance of the Issuers and
their subsidiaries. Any market-making activity will be subject to the limits
imposed by the Exchange Act. There can be no assurance that, even following
registration of the Exchange Notes, an active trading market will exist for the
Exchange Notes or that any such trading market will be liquid.
Consequences of Failure to Exchange
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Issuers do
not intend to register the Original Notes under the Securities Act. In addition,
any Holder of Original Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes not tendered could be adversely affected. See "The Exchange
Offer" and "Original Notes Registration Rights."
USE OF PROCEEDS
There will be no proceeds to the Issuers from the exchange pursuant to the
Exchange Offer. $5 million of the proceeds from the issuance of the Original
Notes was used for the Partnership's general working capital requirements and
the balance of the proceeds was used to redeem all of the issued and outstanding
Old Senior Notes at 100% of their principal amount and to repay the Term Loan in
full.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Original Notes were originally issued and sold on April 17, 1998. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and Rule 144A of the
Securities Act. Pursuant to the Registration Rights Agreement, the Issuers and
the Guarantors have agreed to file by July 17, 1998 a Registration Statement
with respect to an offer to exchange the Original Notes for the Exchange Notes
and to use their reasonable best efforts to cause such registration statement to
become effective by September 21, 1998 and, upon becoming effective, to commence
the Exchange Offer and cause the same to remain open for acceptance for not less
than 20 consecutive business days after the date of commencement. If the
Exchange Offer is not consummated within 120 days following the date the
Registration Statement is declared effective or, under certain circumstances,
the Initial Purchaser so requests, the Issuers will file and use their best
efforts to cause to be declared effective a Shelf Registration Statement with
respect to resales of the Original Notes and the guarantees thereof from time to
time and will use their best efforts to keep such registration statement
effective until three years after the effective date thereof. If the applicable
registration statement is not filed or declared effective or ceases to be
effective or the Exchange Offer is not consummated within the applicable time
periods related thereto (each, a "Registration Default"), the Issuers will be
required to pay Liquidated Damages to each Holder of the Original Notes, in the
amount of $.05 per week per $1,000 principal amount of Original Notes for the
initial 60-day period following such Registration Default. The amount of such
Liquidated Damages will thereafter increase by an additional $.05 per week per
$1,000 principal amount of Original Notes. If, subsequently, such Registration
Default is cured, the accrual of Liquidated Damages will cease. See "Original
Notes Registration Rights."
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Issuers with respect to the Registration Rights Agreement.
Terms of the Exchange
The Issuers hereby offer to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Original Notes. The terms of the Exchange Notes are identical in all respects to
the terms of the Original Notes for which they may be exchanged pursuant to this
Exchange Offer, except that the Exchange Notes will generally be freely
transferable by Holders thereof, and the Holders of the Exchange Notes (as well
as remaining Holders of any Original Notes) will not be entitled to registration
rights under the Registration Rights Agreement. See "Original Notes Registration
Rights." The Exchange Notes will evidence the same debt as the Original Notes
and will be entitled to the benefits of the Note Indentures. See "Description of
the Senior Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by Holders thereof (other than any Holder which
is (i) an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Issuer or (iii) broker-dealers who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such Holder's
business, and such Holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging, and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act (even though some selling broker-dealers may be
deemed to be an "underwriter" within the meaning of the Securities Act).
Broker-dealers who acquired Original Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Issuers have agreed that, for
a period not to exceed 180 days after the Exchange Date, they will make this
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Prospectus available to any broker-dealer for use in connection with any such
resale. Any Holder that cannot rely upon such interpretations must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Tendering Holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on ________________, 1998, unless the
Issuers in their sole discretion extend the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Issuers, expires.
The Issuers reserve the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to U.S. Bank
National Association (the "Exchange Agent") and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Original Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Issuers expressly reserve the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Issuers and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Original Notes. If any such termination or
amendment occurs, the Issuers will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the Holders of the
Original Notes as promptly as practicable. Unless the Issuers terminate the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Issuers will exchange the Exchange Notes for the Original Notes on the
Exchange Date.
If the Issuers waive any material condition to the Exchange Offer, or amend
the Exchange Offer in any other material respect, and if at the time that notice
of such waiver or amendment is first published, sent or given to Holders of
Original Notes in the manner specified above, the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the fifth
business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Issuers to record Holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of Holders for subsequent
transmittal to beneficial owners of Original Notes.
How to Tender
The tender to the Issuers of Original Notes by a Holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
Holder and the Issuers in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. A Holder of an Original Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates
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representing the Original Notes being tendered and any required signature
guarantees (or a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") pursuant to the procedure described below), to the Exchange Agent
at its address set forth on the back cover of this Prospectus on or prior to the
Expiration Date or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered Holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuers and duly executed by the registered Holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a firm (an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Original Notes not exchanged are to be delivered to an
address other than that of the registered Holder appearing on the note register
for the Original Notes, the signature on the Letter of Transmittal must be
guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such Holder promptly and instruct such
Holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Original Notes at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial institution
that is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Original Notes by causing the Book-Entry Transfer
Facility to transfer such Original Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Original Notes
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at the address specified on the back cover page of this
Prospectus on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
The method of delivery of Original Notes and all other documents is at the
election and risk of the Holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a Holder pursuant to the Exchange Offer if the Holder does not
provide his taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. Each tendering
Holder should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Issuers and the Exchange Agent.
Guaranteed Delivery Procedures. If a Holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
Holder, the names in which the Original Notes are registered and, if possible,
the certificate numbers of the Original Notes to be tendered, and stating that
the tender is being made thereby and guaranteeing that within five New York
Stock Exchange trading days after the date of execution of such letter, telegram
or facsimile
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transmission by the Eligible Institution, the Original Notes, in proper form for
transfer, will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Original Notes being tendered by the above-described
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Issuers may, at their option, reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described in this paragraph are being delivered with this Prospectus and the
related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering Holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Issuers, be unlawful. The Issuers also reserve the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular Holder whether or not similar defects or
irregularities are waived in the case of other Holders. None of the Issuers, the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Issuers' interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Issuers and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Issuers
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Issuers and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Issuers of their
obligations under the Registration Rights Agreement and that the Issuers shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Issuers or an affiliate of the Issuers, that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes or (b) that it is an
"affiliate" (as defined) of the Issuers or of the initial purchasers in the
Initial Offering of the Original Notes, and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
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Withdrawal Rights
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered Original Notes to be withdrawn, the certificate numbers of Original
Notes to be withdrawn, the principal amount of Original Notes to be withdrawn
(which must be an authorized denomination), a statement that such Holder is
withdrawing his election to have such Original Notes exchanged, and the name of
the registered Holder of such Original Notes, and must be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Issuers that the person withdrawing the tender has succeeded
to the beneficial ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuers, and
such determination will be final and binding on all parties.
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuers shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if the Issuers have given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering Holders of Original
Notes for the purposes of receiving Exchange Notes from the Issuers and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Issuers will be returned without expense to the
tendering Holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) promptly following the Expiration Date or, if the Issuers terminate
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is so terminated.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuers will not be required to issue Exchange Notes
in respect of any properly tendered Original Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if (a)
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof, or (iii) resulting in
a material delay in the ability of the Issuers to accept for exchange or
exchange some or all of the Original Notes pursuant to the Exchange Offer; (b)
any statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the sole judgment of the Issuers might
directly or indirectly result in any of the consequences referred to in clauses
(a)(i) or (ii) above or, in the sole judgment of the Issuers, might result in
the Holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of
28
<PAGE>
the Commission referred to on the cover page of this Prospectus, or would
otherwise make it inadvisable to proceed with the Exchange Offer; or (c) a
material adverse change shall have occurred in the business, condition
(financial or otherwise), operations, or prospects of the Issuers.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Issuers) giving rise to such condition or may be waived by the Issuers in whole
or in part at any time or from time to time in their sole discretion. The
failure by the Issuers at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, and each right will be deemed an
ongoing right which may be asserted at any time or from time to time. In
addition, the Issuers have reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Issuers concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Issuers will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Note Indenture under the Trust Indenture Act of
1939 (the "Trust Indenture Act").
Exchange Agent
U.S. Bank National Association has been appointed as the Exchange Agent for
the Exchange Offer. Letters of Transmittal must be addressed to the Exchange
Agent at its address set forth on the back cover page of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
Solicitation of Tenders; Expenses
The Issuers have not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Issuers
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Issuers will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting and legal fees, will be paid by
the Issuers and are estimated at approximately $500,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuers. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuers since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Holders of Original Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuers may, at
their discretion, take such action as it may deem necessary to make the Exchange
Offer in any such jurisdiction and extend the Exchange Offer to Holders of
Original Notes in such jurisdiction. In any jurisdiction the securities laws or
blue sky laws of which require the Exchange Offer to be made by a licensed
broker or dealer, the Exchange Offer is being made on behalf of the Issuers by
one or more registered brokers or dealers which are licensed under the laws of
such jurisdiction.
Appraisal Rights
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
29
<PAGE>
Other
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Issuers will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Note Indenture, except for any such
rights under the Registration Rights Agreement, which by their terms terminate
or cease to have further effect as a result of the making of this Exchange
Offer. See "Description of the Senior Notes." All untendered Original Notes will
continue to be subject to the restriction on transfer set forth in the Note
Indenture. To the extent that Original Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Original Notes could be
adversely affected. See "Risk Factors--Consequences of Failure to Exchange."
The Issuers may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
30
<PAGE>
CAPITALIZATION(1)
The following table sets forth the capitalization of the Partnership as of
June 30, 1998. The table should be read in conjunction with the Partnership's
consolidated financial statements and related notes thereto included elsewhere
in this Prospectus:
As of June 30, 1998
Actual
(in thousands)
Cash ............................................... $ 19,148
Mortgage Notes ..................................... 213,590
PIK Notes .......................................... 79,496
Senior Exchange Notes .............................. 62,000
TCHI Exchange Notes ................................ 5,000
Other Debt (including current maturities) .......... 2,764
Total Partners' Capital .......................... 120,670
--------
Total Capitalization ........................... $502,668
========
(1) As the Senior Notes will be exchanged for existing notes which are
identical in terms, the Actual and As Adjusted Capitalization of the
Partnership are the same as of June 30, 1998.
31
<PAGE>
CONSOLIDATED SELECTED FINANCIAL DATA
The Partnership
The following table sets forth (a) certain historical consolidated
financial information of the Partnership for the years ended December 31, 1993,
1994, 1995, the period from January 1, 1996 through October 6, 1996, the period
from October 7, 1996 (the date of the Castle Acquisition) through December 31,
1996 and the year ended December 31, 1997 and (b) certain unaudited financial
information of the Partnership for the six months ended June 30, 1997 and 1998.
The results set forth for the interim period are not necessarily indicative of
the results for the full year. All financial information should be read in
connection with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated and condensed financial statements
and the related notes thereto all of which are included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Period from Period from
January 1, October 7,
Years Ended December 31, 1996 through 1996 through Year Ended Six Months Ended
--------------------------------- October 6, December 31, December 31, June 30,
1993(1) 1994 1995 1996 1996(2) 1997 1997 1998
--------- --------- --------- --------- --------- --------- --------- ---------
Predecessor Successor
---------------------------------------------- --------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Gross Revenues ........... $ 305,418 $ 316,074 $ 339,516 $ 247,614 $ 63,690 $ 328,794 $ 163,198 $ 151,376
Less--Promotional
Allowances ............. 34,530 34,521 37,288 32,887 8,944 44,118 19,735 17,932
--------- --------- --------- --------- --------- --------- --------- ---------
Net Revenues ............. 270,888 281,553 302,228 214,727 54,746 284,676 143,463 133,444
Total Costs and Expenses . 243,022 252,729 267,867 207,691 57,213 263,160 132,349 121,446
Income (Loss) from --------- --------- --------- --------- --------- --------- --------- ---------
Operations ............. 27,866 28,824 34,361 7,036 (2,467) 21,516(4) 11,114 11,998(4)
Other Income ............. -- -- -- 3,000 -- -- -- --
Interest Income .......... 675 636 504 386 217 452 160 381
Interest Expense ......... (56,926) (44,173) (46,017) (36,949) (11,553) (49,892) (24,528) (25,377)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Loss ................. $ (28,385) $ (14,713) $ (11,152) $ (26,527) $ (13,803) $ (27,924)(4) $ (13,254) $ (12,998)(4)
========= ========= ========= ========= ========= ============ ========= ============
Other Data
Deficiency in Earnings (3) . $ (28,385) $ (14,713) $ (11,152) $ (26,527) $ (13,803) $ (27,924) $ (13,254) $ (12,998)
========= ========= ========= ========= ========= ========= ========= =========
Balance Sheet Data
Cash and Cash
Equivalents ............ $ 20,439 $ 19,122 $ 21,038 $ 19,373 $ 15,380 $ 14,472 $ 16,333 $ 19,148
========= ========= ========= ========= ========= ========= ========= =========
Total Assets ............. $ 375,935 $ 368,797 $ 370,581 $ 363,468 $ 548,011 $ 541,406 $ 549,759 $ 542,075
========= ========= ========= ========= ========= ========= ========= =========
Current Liabilities ...... $ 34,463 $ 34,084 $ 38,402 $ 47,427 $ 40,931 $ 61,665 $ 61,919 $ 56,978
========= ========= ========= ========= ========= ========= ========= =========
Total Long-Term Debt, Net
of Current Maturities .. $ 309,794 $ 314,433 $ 323,015 $ 330,665 $ 335,584 $ 341,343 $ 335,923 $ 360,887
========= ========= ========= ========= ========= ========= ========= =========
Total Capital ............ $ 31,678 $ 16,965 $ 5,813 $ (20,714) $ 166,592 $ 133,668 $ 148,338 $ 120,670
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
- ----------
(1) On December 28, 1993, the Partnership and its affiliated entities
consummated the Castle Recapitalization, which materially affects the
comparability of the information set forth above.
(2) Pursuant to the terms of the Agreement dated as of June 24, 1996, as
amended, between THCR Holdings and entities owned by Trump, THCR Holdings
acquired on October 7, 1996 all of the outstanding equity interest of the
Partnership. The Castle Acquisition has been accounted for as a purchase.
For his equity interest in the Partnership, Trump received a 15.33863%
limited partnership interest in THCR Holdings valued at $168,126,000, which
is exchangeable into 5,837,700 shares of THCR Common Stock. The excess of
the purchase price over the fair value of the net assets acquired of
$196,109,000 (including transaction costs, the purchase of the outstanding
TCHI warrants and the historical negative book value of the Partnership of
$20,714,000) has been recorded on the books of the Partnership and has been
allocated to property, plant and equipment based upon an appraisal. As a
result of the Castle Acquisition, a new basis of accounting was established
and financial statements prior to October 7, 1996 are presented as
Predecessor financial statements. The financial statements from October 7,
1996 are presented as Successor financial statements.
(3) For the purposes of computing this ratio, earnings consist of income (loss)
before income taxes, extraordinary items and fixed charges, adjusted to
exclude capitalized interest. Fixed charges consist of interest expense,
including amounts capitalized, and the portion of operating lease rental
expense that is representative of the interest factor (deemed to be
one-third of operating lease rental expense).
(4) During the second quarter of 1997, the Partnership revised its estimates of
the useful lives of buildings, building improvements and furniture and
fixtures which were acquired in 1996. Buildings and building improvements
were reevaluated to have a forty year life and furniture and fixtures were
determined to have a five to seven year life. During 1997 and the six
months ended June 30, 1998, the net effect of applying these new lives was
to decrease the net loss by approximately $4,226,000 and $1,409,000,
respectively.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The financial information presented below reflects the financial condition
and results of operations of the Partnership. Funding is a wholly owned
subsidiary of the Partnership and conducts no business other than collecting
amounts due under certain intercompany notes from the Partnership for the
purpose of paying principal of, premium, if any, and interest on its
indebtedness, which Funding issued as a nominee for the Partnership.
THCR Holdings acquired the Partnership on October 7, 1996. For purposes of
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Partnership's results of operations for the year ended December
31, 1996 include both the results of operations of the Partnership's predecessor
from January 1, 1996 through October 6, 1996 and the Partnership from October 7,
1996 through December 31, 1996. The net effect of the Castle Acquisition was to
increase the carrying value of property, plant and equipment. The Partnership's
subsequent results of operations reflect such increased depreciation expense.
Gaming revenues are the primary source of the Partnership's revenues and
primarily consist of slot machine and table game win. The following table
details activity for the major components of gaming revenue:
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
----------------------------------------- -----------------------
1997 1996 1995 1998 1997
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Table Game Revenue .................. $ 76,128 $ 64,207 $ 80,174 $ 32,809 $ 37,343
Increase (Decrease) from
Prior Period ...................... $ 11,921 $ (15,967) $ (4,534)
Table Game Drop ..................... $ 498,536 $ 494,778 $ 487,707 $ 212,620 $ 244,905
Increase (Decrease) from Prior
Period ............................ $ 3,758 $ 7,071 $ (32,285)
Table Game Win Percentage ........... 15.3% 13.0% 16.4% 15.4% 15.2%
Increase (Decrease) from
Prior Period ...................... 2.3 pts. (3.4) pts. 0.2 pts.
Number of Table Games ............... 91 87 87 93 95
Increase (Decrease) from
Prior Period ...................... 4 -- 2
Slot Revenue ........................ $ 183,233 $ 182,287 $ 194,043 $ 90,155 $ 94,353
Increase (Decrease) from
Prior Period ...................... $ 946 $ (11,756) $ (4,198)
Slot Handle ......................... $ 2,266,988 $ 2,253,051 $ 2,288,246 $ 1,113,553 $ 1,137,893
Increase (Decrease) from
Prior Period ...................... $ 13,937 $ (35,195) $ (24,340)
Slot Win Percentage ................. 8.1% 8.1% 8.5% 8.1% 8.3%
Decrease from Prior Period .......... -- (0.4) pts. (0.2 pts.)
Number of Slot Machines ............. 2,198 2,297 2,230 2,159 2,250
(Decrease) Increase from
Prior Period ...................... (99) 67 (91)
Poker Revenue ....................... $ 457 $ 722 $ 1,048 $ -- $ 256
Decrease from Prior Period .......... $ (265) $ (326) $ (256)
Number of Poker Tables .............. 5 6 7 -- 6
Decrease from Prior Period .......... (1) (1) (6)
Other Gaming Revenue ................ $ 1,621 $ 1,122 $ 1,524 $ 812 $ 567
Increase (Decrease) from
Prior Period ...................... $ 499 $ (402) $ 245
Total Gaming Revenue ................ $ 261,439 $ 248,338 $ 276,789 $ 123,776 $ 132,519
Increase (Decrease) from
Prior Period ...................... $ 13,101 $ (28,451) $ (8,743)
</TABLE>
33
<PAGE>
Results of Operations for the Six Months Ended June 30, 1998 and 1997
Table game revenues represent the amount retained by the Partnership from
amounts wagered at table games. The table game win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The Atlantic City industry table game win
percentages were 15.2% and 15.1% for the six month periods ended June 30, 1998
and 1997, respectively.
Non gaming revenues, in the aggregate, decreased by approximately $3.0
million or 10.0% to $27.6 million for the six months ended June 30, 1998 from
$30.6 million for the six months ended June 30, 1997, primarily as a result of a
decrease in complimentary room rates.
Promotional allowances decreased by approximately $1.8 million or 9.1% to
$17.9 million for the six months ended June 30, 1998 from $19.7 million for the
six months ended June 30, 1997, primarily as a result of a decrease in
complimentary food and rooms related to marketing activities. This decrease is
primarily the result of a decrease in promotional spending activity in an effort
to control costs.
Gaming costs decreased approximately $6.8 million or 8.0% to $78.6 million
for the six months ended June 30, 1998 from $85.4 million for the six months
ended June 30, 1997. This decrease is primarily the result of a decrease in
promotional and complimentary expenses.
General and administrative expenses decreased approximately $3.5 million or
11.0% for the six months ended June 30, 1998 from the same period in 1997
primarily due to reduced advertising expenses and payroll and other benefits
related to TCS which provides administrative support services to all of the
Trump Atlantic City properties.
Results of Operations for the Years Ended December 31, 1997 and 1996
Table game revenues represent the amount retained by the Partnership from
amounts wagered at table games. The table game win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The Atlantic City industry table game win
percentages were 15.0% and 15.4% for the years ended December 31, 1997 and 1996,
respectively.
Nongaming revenues, in the aggregate, increased by approximately $4.4
million (7.0%) to $67.4 million for the year ended December 31, 1997 from $63.0
million for the year ended December 31, 1996, primarily as the result of
increases in food and beverage and entertainment revenues in connection with the
retheming of the property.
Promotional allowances increased by approximately $2.3 million (5.5%) to
$44.1 million for the year ended December 31, 1997 from $41.8 million for the
year ended December 31, 1996, primarily as a result of increases in
complimentary rooms and food and beverage related to marketing activities.
Gaming costs and expenses increased by approximately $5.9 million (3.6%) to
$170.6 million for the year ended December 31, 1997 from $164.7 million for the
year ended December 31, 1996. This increase is primarily the result of an
increase in promotional spending, gaming taxes, complimentary activity and
headline entertainment, in an effort to stimulate gaming revenues.
Rooms and food and beverage costs and expenses for the year ended December
31, 1997 as compared to the prior year decreased approximately $1.0 million
(7.6%). This decrease is primarily due to the increased level of complimentary
food, beverage and hotel services provided to patrons. The cost of such
complementaries have been included in gaming costs and expenses.
General and administrative expenses decreased approximately $6.7 million
(9.6%) for the year ended December 31, 1997 from the same period in 1996
primarily due to reduced salaries and employee benefits resulting from cost
containment measures and operational synergies from combining certain
administrative functions with affiliated entities (See Note 6 to the
Consolidated Financial Statements).
Other non-operating income of $3.0 million during 1996 represents the
non-refundable license fee resulting from an energy service agreement entered
into with Atlantic Thermal Systems, Inc. ("Atlantic Thermal") (See Note 10 to
the Consolidated Financial Statements).
34
<PAGE>
Interest expense increased approximately $1.4 million (2.9%) to $49.9
million for the year ended December 31, 1997 from $48.5 million for the year
ended December 31, 1996 primarily due to an increase in the outstanding
principal related to the PIK Notes.
Results of Operations for the Years Ended December 31, 1996 and 1995
Table game revenues represent the amount retained by the Partnership from
amounts wagered at table games. The table game win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The Atlantic City industry table game win
percentages were 15.4% and 15.8% for the years ended December 31, 1996 and 1995,
respectively.
Nongaming revenues, in the aggregate, increased by approximately $300,000
(0.5%) to $63.0 million for the year ended December 31, 1996 from $62.7 million
for the year ended December 31, 1995, primarily as the result of food and
beverage revenue (an approximate $1.7 million (5.1%) increase) which was
partially offset by lower room revenues.
Promotional allowances increased by approximately $4.5 million (12.1%) to
$41.8 million for the year ended December 31, 1996 from $37.3 million for the
year ended December 31, 1995. Marketing programs instituted during 1996 designed
to increase gaming revenues caused an increase in complimentary rooms and food
and beverage activity as compared to the prior year.
Gaming costs and expenses decreased by approximately $2.4 million (1.4%) to
$164.7 million for the year ended December 31, 1996 from $167.1 million for the
year ended December 31, 1995. This decrease is primarily the result of a
decrease in promotional coupon costs, and, to a lesser extent, reduced gaming
tax expense.
Rooms and food and beverage costs and expenses for the years ended December
31, 1996 and 1995 decreased approximately $4.2 million (23.4%). This decrease is
primarily due to the increased level of complimentary food, beverage and hotel
services provided to patrons. The cost of such complementaries have been
included in gaming costs and expenses.
General and administrative expenses increased approximately $1.2 million
(1.8%) to $69.4 million for the year ended December 31, 1996 from $68.2 million
for the year ended December 31, 1995. This increase is principally the result of
an increase in the real estate tax rate on the casino property.
Depreciation and amortization expense increased approximately $2.5 million
(17.1%) to $17.1 million for the year ended December 31, 1996 from $14.6 million
for the year ended December 31, 1995. The primary reason for this increase was
due to the additional depreciation expense related to the acquisition of the
Partnership by THCR Holdings.
Other non operating income of $3.0 million during 1996 represents the
non-refundable license fee resulting from the energy service agreement entered
into with Atlantic Thermal (See Note 10 to the Consolidated Financial
Statements).
Interest expense increased approximately $2.5 million (5.4%) to $48.5
million for the year ended December 31, 1996 from $46.0 million for the year
ended December 31, 1995. This increase is the result of an increase in the
outstanding principal related to the PIK Notes.
Liquidity and Capital Resources
Cash flow from operating activities is the Partnership's principal source
of liquidity. For the year ended December 31, 1997 and the six months ended June
30, 1998, the Partnership's net cash flow provided by operating activities was
$14.0 million and $3.8 million, respectively.
In addition to funding operations, the Partnership's principal uses of cash
are capital expenditures and debt service.
Capital expenditures for 1998 are anticipated to be approximately $5.0
million and principally consist of hotel room renovations, as well as ongoing
casino floor improvements.
35
<PAGE>
At June 30, 1998, the Partnership's debt consisted primarily of (i) the New
Senior Notes, (ii) the Mortgage Notes, (iii) the PIK Notes and (iv) the Working
Capital Loan.
The Mortgage Notes have an outstanding principal amount of approximately
$242.1 million, bear interest at the rate of 11 3/4% per annum and mature on
November 15, 2003.
The PIK Notes have an outstanding principal amount of approximately $86.5
million and mature on November 15, 2005. Interest is currently payable
semi-annually at the rate of 13 7/8%. On or prior to November 15, 2003, interest
on the PIK Notes may be paid in cash or through the issuance of additional PIK
Notes. During the second quarter of 1998 interest in the amount of approximately
$5.6 million was paid thorough the issuance of additional PIK Notes and the
Partnership anticipates that additional interest due during the fourth quarter
of approximately $6.0 million will be paid through the issuance of additional
PIK Notes.
On April 17, 1998, Funding refinanced its Old Senior Notes and its Term
Loan by issuing the New Senior Notes. The proceeds from the issuance of the New
Senior Notes were used to redeem all of the issued and outstanding Old Senior
Notes at 100% of their principal amount and to repay the Term Loan in full. In
conjunction with this refinancing, TCHI obtained a working capital credit
facility (the "Working Capital Loan") and loaned the proceeds to the
Partnership.
The New Senior Notes have an outstanding principal amount of $62.0 million
and bear interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The New Senior Notes mature on April 17, 2003.
The Working Capital Loan has an outstanding principal amount of $5.0
million and bears interest at the rate of 10 1/4% per annum, payable
semi-annually each April and October. The entire principal balance of the
Working Capital Loan matures on April 17, 2003.
A tender offer was made to existing Mortgage Note holders on July 9, 1998
offering $940 per $1,000 of principal amount, plus accrued interest. On August
19, 1998, the tender offer was amended to increase the consideration to be paid
to tendering Mortgage Note holders to $975 per $1,000 of principal amount, plus
accrued interest. Consummation of the tender offer is conditioned upon, among
other things, a minimum tender of 98% of the principal amount of the Mortgage
Notes. The expiration of the tender offer has been extended to September 17,
1998. It is anticipated that concurrently with the consummation of the tender
offer, the New Senior Notes and the Working Capital Loan would be refinanced and
redeemed. Although it is the Partnership's intention to complete this
transaction, no assurance can be made as to the ultimate consummation of the
refinancing, or on the terms as are currently outlined in the existing tender
offer.
The Partnership's total cash debt service requirement was approximately
$20.9 million during the six months ended June 30, 1998 and the Partnership
anticipates that approximately $18.9 million in cash will be required during the
remainder of 1998 to meet its debt service obligations. The Partnership has the
authority to obtain a working capital facility of up to $10.0 million (of which
approximately $5.4 million is outstanding), although there can be no assurance
that such financing will be available on terms acceptable to the Partnership.
The Senior Note Indenture, the TCHI Note Indenture, the Mortgage Note
Indenture and the PIK Note Indenture impose restrictions on Funding, the
Partnership and TCHI. Generally, these restrictions relate to the incurrence of
additional indebtedness, the distribution of cash and/or property of the
Partnership's partners and the repayment or repurchase of pari passu or junior
securities, investments, mergers and sales of assets and the creation of liens.
These restrictions could limit the ability of the Partnership to respond to
changing business and economic conditions. A failure to comply with any of these
obligations could also result in an Event of Default under the Senior Note
Indenture, the TCHI Note Indenture, the Mortgage Note Indenture or the PIK Note
Indenture, which could permit acceleration of the Senior Notes, the TCHI Notes,
the Mortgage Notes or the PIK Notes. In addition, additional borrowings under
the Working Capital Facility could contain affirmative and negative covenants
customary to loan documentation for highly leveraged companies, which covenants
could be more restrictive than those contained in the Senior Note Indenture, the
TCHI Note Indenture, the Mortgage Note Indenture and the PIK Note Indenture.
The ability of TCHI, Funding and the Partnership to pay their indebtedness
when due, as well as to improve the working capital deficit position of the
Partnership, will depend on their ability to either generate cash from
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operations sufficient for such purpose or to refinance such indebtedness on or
before the date on which it becomes due. Cash flow from operations may not be
sufficient to repay a substantial portion of the principal amount of their
long-term debt at maturity. The future operating performance of the Partnership
and the ability to refinance this debt will be subject to the then prevailing
economic conditions, industry conditions and numerous financial, business and
other factors, many of which are beyond the control of TCHI, Funding or the
Partnership. There can be no assurance that the future operating performance of
the Partnership will be sufficient to meet these repayment obligations or that
the general state of the economy, the status of the capital markets generally or
the receptiveness of the capital markets to the gaming industry will be
conducive to refinancing this debt or other attempts to raise capital.
The Partnership has assessed the Year 2000 Issue and has begun implementing
a plan to resolve the issue which is expected to be completed in early 1999.
Based upon management's assessment it is anticipated that associated costs
incurred to satisfactorily complete the plan will not be significant.
Seasonality
The gaming industry in Atlantic City is seasonal, with the heaviest
activity occurring during the period from May through September. Consequently,
the Partnership's operating results during the two quarters ending in March and
December would not likely be as profitable as the two quarters ending in June
and September.
Inflation
There was no significant impact on the Partnership's operations as a result
of inflation in 1997, 1996 or 1995.
Recently Issued Accounting Standards
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997.
This statement is effective for the Partnership's fiscal year ending December
31, 1998 and addresses the reporting and displaying of comprehensive income and
its components. Adoption of SFAS No. 130 relates to disclosure within the
financial statements and is not expected to have a material effect on the
Partnership's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997. This statement is effective for the
Partnership's fiscal year ending December 31, 1998 and changes the way public
entities report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports. Adoption of SFAS No. 131 relates to disclosure within
the financial statements and is not expected to have a material effect on the
Partnership's financial statements.
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BUSINESS
General
Funding was incorporated under the laws of the State of New Jersey in May
1985 and is wholly owned by the Partnership. Funding was formed to serve as a
financing corporation to raise funds for the benefit of the Partnership. TCHI
was incorporated under the laws of the State of New Jersey in April 1985, is
wholly owned by THCR Holdings and is the general partner of the Partnership.
Since Funding and TCHI have no business operations, their ability to service
their indebtedness is completely dependent upon funds they receive from the
Partnership. Accordingly, the discussion in this Prospectus relates primarily to
the Partnership and its operations.
The Partnership was formed in 1985 for the sole purpose of acquiring and
operating Trump's Castle Casino Resort, a luxury casino hotel located in the
Marina District. During the second quarter of 1997 the Partnership rethemed the
property with a nautical emphasis and renamed it Trump Marina Hotel Casino.
Prior to the acquisition of Trump Marina (which at that time was Trump's Castle
Casino Resort) on October 7, 1996 by THCR Holdings, the partners in the
Partnership were TCI-II, which had a 37.5% interest in the Partnership, Trump,
who had a 61.5% interest in the Partnership, and TCHI, which had a 1% interest
in the Partnership. Trump, by virtue of his ownership of TCI-II and TCHI, was
the beneficial owner of 100% of the common equity interest in the Partnership,
subject to the right of holders of the Castle Warrants to acquire an indirect
beneficial interest in 0.5% of the common equity interest in the Partnership.
Subsequent to the Castle Acquisition, the partners in the Partnership are THCR
Holdings, which has a 99% limited partnership interest in the Partnership, and
TCHI, which has a 1% general partnership interest in the Partnership. THCR
Holdings, by virtue of its ownership of TCHI, is the beneficial owner of 100% of
the common equity interest in the Partnership.
The Castle Acquisition has further strengthened the position of THCR as an
industry leader. The Castle Acquisition has provided THCR with a significant
presence in the Marina District, the principal focus of expansion in the
Atlantic City Market. In addition, the Castle Acquisition has provided further
opportunities for operational efficiencies and economies of scale and eliminated
the perceived conflict of interest caused by the differing ownership of the
Atlantic City Properties. Ownership of Trump Marina will enable THCR to retain
patrons that may be drawn from The Boardwalk to the Marina District by new
casino development in the Marina District. The Castle Acquisition has also
enabled THCR to benefit from (i) the excellent condition of the current
facilities at Trump Marina, which have been designed to accommodate additional
development with minimal disruption to existing operations, and (ii) the
proximity of Trump Marina to the H-Tract. The holders of the Notes must rely
solely on the Partnership, and may not rely on THCR, Trump Plaza or the Taj
Mahal, to make payments on the Notes.
On October 23, 1996, TCS, Plaza Associates, Taj Associates and the
Partnership entered into an Amended and Restated Services Agreement pursuant to
which TCS provides each of Plaza Associates, Taj Associates and the Partnership
certain management, financial and other functions and services necessary and
incidental to the respective operations of each of their casino hotels.
Management believes that TCS's services to the Partnership will result in cost
savings and operational synergies. Trump Communications, a New Jersey limited
liability company and a subsidiary of TCS, was formed on January 31, 1997 for
the purpose of realizing cost savings and operational synergies by consolidating
advertisement functions of, and providing certain services to, each of Plaza
Associates, Taj Associates and the Partnership.
The Partnership operates in only one industry segment. See "Consolidated
Selected Financial Data" below.
Trump Marina
The Partnership owns and operates Trump Marina, a luxury casino hotel
located on 14.7 acres in the Marina District approximately two miles from The
Boardwalk. Trump Marina is approximately one-quarter mile from the H-Tract.
Trump Marina consists of a 27-story hotel tower with 728 rooms, including 185
suites, 99 of which are oversized luxury suites, and contains approximately
75,900 square feet of gaming space. Trump Marina offers 2,198 slot machines, 91
table games, 8 restaurants, approximately 58,000 square feet of convention,
ballroom and meeting space, a 9-story parking garage, which can accommodate
approximately 3,000 cars, a 540-seat cabaret theater, two cocktail lounges, a
swimming pool, tennis courts, a health club and a roof-top helipad. In addition,
Trump Marina operates a 645-slip marina which is adjacent to the casino hotel.
An elevated enclosed walkway connects Trump Marina to a two-story building which
contains offices, a nautically themed retail store, a cocktail
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lounge and a 240-seat gourmet restaurant that overlooks the marina and the
Atlantic City skyline. As a result of its high quality amenities, its
exceptional customer service and its geographical location, Trump Marina
distinguishes itself as a desirable alternative to the Atlantic City casinos
located on The Boardwalk.
Marketing Strategy
Management's recent retheming of Trump Marina is intended to build upon the
casino's established customer base by attracting a younger crowd to the
facility. In keeping with this initiative, management has aimed to differentiate
Trump Marina from other Atlantic City casinos by offering contemporary
entertainment attractions and introducing its current "Wild Side" marketing
campaign. The "Wild Side" marketing program consists of a coordinated
advertising, entertainment and marketing campaign that is geared toward a
younger generation of patrons but will not exclude Trump Marina's established
customer base. Management, which developed the "Wild Side" marketing program
after careful study of the Atlantic City Market, seeks to accomplish its goals
via an advertising campaign with a fun and youthful appeal, as well as providing
varied and extensive contemporary entertainment in the Grand Cayman Ballroom,
"The Shell" (a cabaret style theater), "The Wave" (a night club), "The Deck"
(for outdoor summertime entertainment) and large outdoor performances billed as
"Rock the Dock" concerts.
Service. By providing and maintaining a first-class facility and
exceptional service, Trump Marina has earned the Five Star Diamond Award from
the American Academy of Hospitality Sciences, the American Automobile
Association's "Four Diamond" rating and a "Four Star" Mobil Travel Guide rating.
Trump Marina provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality amenities and
first-class service.
Gaming Environment. To stay abreast of current gaming trends in Atlantic
City, Trump Marina's management continuously monitors the configuration of the
casino floor and the games it offers to patrons with a view towards making
changes and improvements. A sophisticated computerized slot tracking and
marketing system is employed to perform this analysis. This monitoring has
confirmed a recent trend in the Atlantic City Market towards fewer table games
and more slot machines. For example, slot machine revenue for the Atlantic City
Market increased from 54.6% of the industry gaming revenue in 1988 to 70.4% of
industry gaming revenue in 1997. Trump Marina experienced a similar increase,
with slot revenue increasing from 52.5% of gaming revenue in 1988 to 70.1% of
gaming revenue in 1997. In response to this trend, management devoted more of
its casino floor space to slot machines between 1994 and 1997, and has replaced
substantially all of its slot machines with newer machines. Trump Marina has
also responded to this trend by introducing its Monte Carlo club for high-end
slot players.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, Trump Marina offers complimentaries primarily to patrons
with a demonstrated propensity for gaming at Trump Marina. The policy at Trump
Marina is to focus promotional activities, including complimentaries, on middle
and upper middle market "drive-in" patrons who visit Atlantic City frequently
and have proven to be the most profitable market segment.
Entertainment and Special Events. Trump Marina pursues a coordinated
program of headline entertainment and special events. Trump Marina offers
headline entertainment approximately twenty times a year in its main ballroom,
complimented by contemporary acts each weekend in the cabaret theater. As a part
of its marketing plan, Trump Marina offers special events aimed at its core,
middle and upper-middle market segments. Trump Marina also hosts special events
on an invitation-only basis in an effort to attract existing targeted gaming
patrons and build loyalty among these patrons. These special events include golf
tournaments, theme parties and gaming tournaments. Headline entertainment is
scheduled so as not to overlap with any of these special events. In addition, as
part of its "Wild Side" marketing campaign, Trump Marina features outdoor bands
nightly (in season) as well as outdoor concerts promoted under the "Rock the
Dock" theme. Recent performers have included The Wallflowers and comedian Chris
Rock.
Player Development and Casino Hosts. Trump Marina has contracts with sales
representatives in New Jersey, New York and other states to promote the casino
hotel. Trump Marina has sought to attract more middle market slot patrons, as
well as premium players, through its "junket" marketing operations, which
involve attracting groups of patrons by providing airfare, gifts and room
accommodations. Player development personnel host special events, offer
incentives and contact patrons directly in an effort to attract high-limit table
game patrons.
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The casino hosts at Trump Marina assist table game patrons, and the slot
sales representatives at Trump Marina assist slot patrons on the casino floor,
make room and dinner reservations and provide general assistance. Slot sales
representatives also solicit Marina Card (the frequent player identification
slot card) sign-ups in order to increase Trump Marina's marketing base.
Promotional Activities. The Marina Card constitutes a key element in the
direct marketing program of Trump Marina. Slot machine players are encouraged to
register for and utilize their personalized Marina Card to earn various
complimentaries based upon their level of play. The Marina Card is inserted
during play into a card reader attached to the slot machine for use in
computerized rating systems. These computer systems record data about the
cardholder, including playing preferences, frequency and denomination of play
and the amount of gaming revenues produced. Slot sales and management personnel
are able to monitor the identity and location of the cardholder and the
frequency and denomination of the cardholder's slot play. They also use this
information to provide attentive service to the cardholder on the casino floor.
Trump Marina designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Marina Card and on table wagering by the casino games supervisor. Trump Marina
conducts slot machine and table game tournaments in which cash prizes are
offered to a select group of players invited to participate in the tournament
based upon their tendency to play. Such players tend to play at their own
expense during "off-hours" of the tournament. At times, tournament players are
also offered special dining and entertainment privileges that encourage them to
remain at Trump Marina.
Credit Policy. Historically, Trump Marina has extended credit on a
discretionary basis to certain qualified patrons. Credit play, as a percentage
of total dollars wagered, was approximately 32.4%, 31.4% and 30.0% for 1997,
1996 and 1995, respectively. As part of Trump Marina's business strategy, Trump
Marina has imposed stricter standards on applications for new or additional
credit. Trump Marina bases credit limits on each individual patron's
creditworthiness, as determined by an examination of the following criteria: (i)
checking each patron's personal checking account for current and average
balances; (ii) performing a credit check on each domestic patron; and (iii)
checking each patron's credit limits and indebtedness at all casinos in the
United States as well as many island casinos. The above determination of a
patron's continued creditworthiness is performed for continuing patrons on a
yearly basis or more frequently if Trump Marina deems a re-determination of
credit worthiness is necessary. In addition, depositing of markers is regulated
by the State of New Jersey. Markers in increments of $1,000 or less are
deposited in a maximum of 7 days; markers of increments of $1,001 to $5,000 are
deposited in a maximum of 14 days; and markers in increments of over $5,001 are
deposited in a maximum of 45 days. Markers may be deposited sooner at the
request of patrons or at Trump Marina's discretion.
Bus Program. Trump Marina has a bus program which transports approximately
700 gaming patrons per day during the week and 650 per day on the weekends. The
Partnership's bus program offers incentives and discounts to certain scheduled
and chartered bus customers. Based on historical surveys, management has
determined that gaming patrons who arrive by special charters as opposed to
scheduled bus lines or who travel distances greater than 60 miles are more
likely to create higher gaming revenue. Accordingly, Trump Marina's marketing
efforts are focused on such bus patrons.
Trump Marina Retheming
In 1997, Trump Marina completed a project to retheme the casino hotel with
a nautical emphasis, targeting younger customers by offering contemporary
entertainment attractions and emphasizing Trump Marina's energetic, lively
atmosphere.
Employees and Labor Relations
As of March 31, 1998, the Partnership employed approximately 2,550
full-time equivalent employees, of whom approximately 1,100 were subject to
collective bargaining agreements. The Partnership's collective bargaining
agreement with Local No. 54 expires on September 15, 1999. Such agreement
extends to approximately 900 employees. In addition, four other collective
bargaining agreements, which expire in the year 2000, cover approximately 200
maintenance employees. The Partnership believes that its relationships with its
employees are satisfactory. Funding and TCHI have no employees.
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Certain employees of the Partnership must be licensed by or registered with
the CCC, depending on the nature of the position held. Casino employees are
subject to more stringent licensing requirements than non-casino employees, and
must meet applicable standards pertaining to such matters as financial
responsibility, good character, ability, casino training, experience and New
Jersey residency. Such regulations have resulted in significant competition for
employees who meet these requirements.
Historical Background
General. Funding was incorporated under the laws of the State of New Jersey
in May 1985 and is wholly owned by the Partnership. Funding was formed to serve
as a financing corporation to raise funds as an agent of the Partnership. Since
Funding has no business operations, its ability to service its indebtedness is
completely dependent upon funds it receives from the Partnership. Accordingly,
the following discussion is related primarily to the Partnership and its
operations.
1992 and 1993 Recapitalizations. On May 29, 1992, TCHI, Funding and the
Partnership restructured their indebtedness through a prepackaged plan of
reorganization to alleviate certain liquidity problems (attributable, in part,
to the overall deterioration in the Atlantic City Market experienced prior to
such time, aggravated by an economic recession in the Northeast and the Persian
Gulf War), to improve the amortization schedule and to extend the maturity of
the Partnership's indebtedness. In December 1993, the Partnership, Funding and
certain affiliated entities completed a recapitalization of their debt and
equity capitalization (the "Castle Recapitalization"). The purpose of the Castle
Recapitalization was (i) to improve the debt capitalization of the Partnership
and, initially, to decrease its cash charges; (ii) to provide the holders of the
Units who participated in the exchange offer in connection with the Castle
Recapitalization with a cash payment of $6.19 and securities having a combined
principal amount of $905 for each Unit; and (iii) to provide Trump with
beneficial ownership of 100% of the common equity interests in the Partnership
(subject to the rights of holders of the Castle Warrants).
As a result of the Castle Recapitalization, TCI-II had a 37.5% equity
interest in the Partnership, Trump had a 61.5% equity interest in the
Partnership and TCHI had a 1% equity interest in the Partnership; accordingly,
through his ownership of 100% of TCI-II and TCHI, Trump was the beneficial owner
of 100% of the equity interests in the Partnership (subject to the rights of the
holders of the Castle Warrants). Also as a consequence of the Castle
Recapitalization, the principal amount of the Partnership's debt was reduced,
and, initially, the Partnership's cash charges were reduced. Upon consummation
of the Castle Recapitalization, the Partnership's outstanding debt, on a
consolidated basis, consisted of the $38 million outstanding on the Term Loan,
$27 million principal amount outstanding of its Old Senior Notes, the
approximately $242 million principal amount outstanding of the Mortgage Notes
(which are subordinated to the Senior Notes and the TCHI Notes) and the
approximately $50 million principal amount outstanding of the PIK Notes) (which
are subordinated to the Senior Notes, the TCHI Notes and the Mortgage Notes).
PIK Note Acquisition. On June 23, 1995, the Partnership entered into the
Option Agreement with Hamilton which granted the Partnership the Option to
acquire the PIK Notes owned by Hamilton. The Option was granted to the
Partnership in consideration of $1.9 million of aggregate payments to Hamilton.
The Option was exercisable at a price equal to 60% of the aggregate principal
amount of the PIK Notes delivered by Hamilton, with accrued but unpaid interest,
plus 100% of the PIK Notes issued to Hamilton as interest subsequent to June 23,
1995. Pursuant to the terms of the Option Agreement, upon the occurrence of
certain events within 18 months of the time the Option is exercised, the
Partnership was required to make an additional payment to Hamilton of up to 40%
of the principal amount of the PIK Notes. On May 21, 1996, the Partnership
assigned the Option to THCR Holdings, which, on that same date, exercised the
Option and acquired approximately 90% of the then outstanding PIK Notes for
approximately $38.7 million, in exchange for which THCR Holdings received an
aggregate of approximately $59.3 million principal amount of PIK Notes.
Castle Acquisition. On October 7, 1996, THCR Holdings acquired from Trump
all of the outstanding equity of the Partnership. The following transactions
were effected in connection with the Castle Acquisition:
(i) Trump contributed to THCR Holdings his 61.5% equity interest in
the Partnership, in consideration of which he received a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares
of THCR Common Stock (valuing each such share at the THCR Stock
Contribution Value);
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(ii) TCI-II contributed to THCR Holdings its 37.5% equity interest in
the Partnership in consideration of which it received a 5.81009% limited
partnership interest in THCR Holdings, exchangeable into 2,211,250 shares
of THCR Common Stock (valuing each such share at the THCR Stock
Contribution Value); and
(iii) Castle Merger Sub merged with and into TCHI (holder of a 1%
equity interest in the Partnership) whereupon (x) each share of TCHI Common
Stock, outstanding immediately prior to the TCHI Merger was converted into
the right to receive the TCHI Consideration and each share of common stock
of Castle Merger Sub was converted into the right to receive one share of
common stock of the surviving corporation of the TCHI Merger and (y) each
holder of the Castle Warrants issued under a warrant agreement, dated as of
December 30, 1993, between TCHI and First Bank National Association, as
warrant agent, became entitled to receive, for each former share of TCHI's
common stock (the "TCHI Common Stock") for which each Castle Warrant was
exercisable, an amount in cash equal to the TCHI Consideration.
In the aggregate, Trump received (i) a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock and (ii)
$884,550 in cash. On October 7, 1996, the closing sale price of the THCR Common
Stock on the New York Stock Exchange was $22.625 per share.
As a result of the Castle Acquisition, on October 7, 1996, THCR's and
Trump's beneficial equity interest in THCR Holdings was approximately 63.4% and
36.6%, respectively, and Trump's beneficial equity interest in THCR Holdings was
exchangeable into 13,918,723 shares of THCR Common Stock. The Castle Acquisition
was approved by the stockholders of THCR on September 30, 1996.
April 1998 Refinancing. On April 17, 1998, the Partnership, Funding and
TCHI refinanced the Old Senior Notes and the Term Loan by issuing the Senior
Notes and the TCHI Notes. The proceeds from the issuance of the Senior Notes and
the TCHI Notes were used to redeem all of the issued and outstanding Old Senior
Notes at 100% of their principal amount, to repay the Term Loan in full and for
the Partnership's general working capital requirements.
Mortgage Note Tender Offer. On July 9, 1998, Funding and the Partnership
commenced a cash tender offer (the "Mortgage Note Tender Offer") to purchase all
of the Mortgage Notes at a purchase price equal to $940 per $1,000 principal
amount plus accrued and unpaid interest. On August 19, 1998, the tender offer
was amended to increase the consideration to be paid to tendering Mortgage Note
holders to $975 per $1,000 of principal amount, plus accrued interest. The
Mortgage Note Tender Offer will expire at 5:00 p.m., New York City time, on
September 17, 1998, unless extended. Consummation of the Mortgage Note Tender
Offer is conditioned, among other things, upon the valid tender of at least 98%
in aggregate principal amount of Mortgage Notes outstanding and regulatory
authority approval by the CCC. It is anticipated that concurrently with the
consummation of the tender offer, the New Senior Notes and the Working Capital
Loan would be financed and redeemed.
Trademark/Licensing
Subject to certain restrictions, THCR has the exclusive right to use the
"Trump" name and likeness in connection with gaming and related activities (the
"License") pursuant to the License Agreement. Pursuant to the License Agreement,
Trump granted to THCR the world-wide right and license to use the Trump Names
and the Marks in connection with casino and gaming activities and related
services and products. The License Agreement does not restrict or restrain Trump
from the right to use or further license the Trump Names in connection with
services and products other than casino services and products.
The License is for a term of the later of: (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant to
an employment, management, consulting or similar services agreement with THCR.
Upon expiration of the term of the License, Trump will grant THCR a
non-exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by the Trademark Security Agreement, pursuant to
which Trump granted THCR a first priority security interest in the Marks for use
in connection with casino services, as well as related hotel, bar and restaurant
services.
Certain Indebtedness of the Partnership
The Mortgage Notes bear interest, payable semi-annually in cash, at 11 3/4%
and mature on November 15, 2003. The Mortgage Notes may be redeemed at Funding's
option at a specified percentage of the principal amount commencing in 1998.
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The Mortgage Notes are secured by a promissory note of the Partnership to
Funding (the "Partnership Note") in an amount and with payment terms necessary
to service the Mortgage Notes. The Partnership Note is secured by a mortgage on
Trump Marina and substantially all of the other assets of the Partnership. The
Partnership Note has been assigned by Funding to the trustee of the indenture
under which the Mortgage Notes were issued to secure the repayment of the
Mortgage Notes. In addition, the Partnership has guaranteed the payment of the
Mortgage Notes (the "Guaranty"), which is secured by a mortgage on Trump Marina
and substantially all of the assets of the Partnership. The Partnership Note and
the Guaranty are expressly subordinated to the indebtedness of the Senior Notes
and the TCHI Notes (collectively, the "Senior Indebtedness") and the liens of
the mortgages securing the Partnership Note and the Guaranty are subordinate to
the liens securing the Senior Indebtedness.
The PIK Notes bear interest payable, at Funding's option in whole or in
part in cash and through the issuance of additional PIK Notes, semi-annually at
the rate of 7% through September 30, 1994 and 13 7/8% through November 15, 2003.
After November 15, 2003, interest on the PIK Notes is payable in cash at the
rate of 13 7/8%. The PIK Notes mature on November 15, 2005. The PIK Notes may be
redeemed at Funding's option at 100% of the principal amount under certain
conditions, as described in the indenture governing the PIK Notes, and are
required to be redeemed from a specified percentage of any equity offering which
includes the Partnership. Interest has been accrued using the effective interest
method. On May 15, 1997 and November 15, 1997, the semi-annual interest payments
of $4.9 million and $5.2 million, respectively, were paid by the issuance of
additional PIK Notes.
The PIK Notes are secured by a subordinated promissory note of the
Partnership to Funding (the "Subordinated Partnership Note"), which has been
assigned to the trustee for the PIK Notes, and the Partnership has issued a
subordinated guaranty (the "Subordinated Guaranty") of the PIK Notes. The
Subordinated Partnership Note and the Subordinated Guaranty are expressly
subordinated to the Senior Indebtedness, the Partnership Note and the Guaranty.
The Notes bear interest, payable semi-annually in cash, at 10 1/4% and
mature on April 30, 2003. Similar to the Mortgage Notes, the Senior Notes are
secured by an assignment of a promissory note of the Partnership (the "Senior
Partnership Note") which is in turn secured by a mortgage on Trump Marina and
substantially all of the other assets of the Partnership. The Partnership has
guaranteed the payment of the Senior Notes (the "Senior Guaranty"), which Senior
Guaranty is secured by a mortgage on Trump Marina and substantially all of the
assets of the Partnership. The Partnership has also guaranteed the payment of
the TCHI Notes (the "TCHI Guaranty"), which TCHI Guaranty is secured by a
mortgage on Trump Marina and substantially all of the assets of the Partnership.
The terms of the Notes, the Mortgage Notes and the PIK Notes include
limitations on the amount of additional indebtedness the Partnership may incur,
distributions of the Partnership's capital, investments and other business
activities.
Atlantic City Market
The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.91 billion in gaming revenues
in 1997, an approximately 2.1% increase over 1996 gaming revenues of
approximately $3.83 billion. From 1992 to 1997, total gaming revenues in
Atlantic City have increased approximately 21.4%, while hotel rooms increased by
25.5% during that period. Although total visitor volume to Atlantic City
remained relatively constant in 1997, the volume of bus customers dropped to 9.4
million in 1997, continuing a decline from 11.7 million 1991. The volume of
customers traveling by other means to Atlantic City has grown from 20.4 million
in 1992 to 34.3 million in 1997.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Management believes that this relatively slower growth is primarily attributable
to two key factors. First, there were no significant additions to hotel capacity
in Atlantic City until 1996. Las Vegas visitor volumes have increased, in part,
due to the continued addition of new hotel capacity. Both markets have exhibited
a strong correlation between hotel room inventory and total casino revenues.
Secondly, the regulatory environment and infrastructure problems in Atlantic
City have made it more difficult and costly to operate. Total regulatory costs
and tax levies in New Jersey have exceeded those in Nevada since inception, and
there is generally a higher level of regulatory oversight in New Jersey than in
Nevada. The infrastructure problems, manifested by
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impaired accessibility of the casinos, downtown Atlantic City congestion and the
condition of the areas surrounding the casinos have made Atlantic City less
attractive to the gaming customer.
Total Atlantic City slot revenues increased 3.6% in 1997, continuing a
trend of increases over the past five years. From 1992 through 1997, slot
revenue growth in Atlantic City has averaged 5.2% per year. Total table game
revenue did not increase in 1997, while table game revenue from 1992 to 1997 has
increased on average 0.8% per year. Management believes the slow growth in table
game revenue is primarily attributable to two factors. First, the slot product
has been significantly improved over the last five years. Bill acceptors, new
slot machines, video poker and blackjack and other improvements have increased
the popularity of slot play among a wider universe of casino patrons. Casino
operators in Atlantic City have added slot machines in favor of table games due
to increased public acceptance of slot play and due to slot machines'
comparatively higher profitability as a result of lower labor and support costs.
Since 1992, the number of slot machines in Atlantic City has increased by 54%,
while the number of table games has increased by 12.6%. Slot revenues increased
from 66% of total casino revenues in 1992 to 70% in 1997. The second reason for
historic slow growth in table game revenue is that table game players are
typically higher end players and are more likely to be interested in overnight
stays and other amenities. During peak season and weekends, room availability in
Atlantic City is currently inadequate to meet demand, making it difficult for
casino operators to aggressively promote table play.
The regulatory environment in Atlantic City has improved over the past
several years. Most significantly, 24-hour gaming has been approved, poker and
keno have been added and regulatory burdens have been reduced. In particular,
comprehensive amendments to New Jersey gaming laws were made in January 1995,
which have eliminated duplicative regulatory oversight and channeled operator's
funds from regulatory support into uses of the New Jersey Casino Reinvestment
Development Authority (the "CRDA"). Administrative costs of regulation will be
reduced while increasing funds will be available for new development. In
addition, in 1994, legislation was enacted which eliminated the requirement that
a casino consist of a "single room" in a casino hotel. A casino may now consist
of "one or more locations or rooms" approved by the CCC for casino gaming.
Atlantic City's new convention center, with approximately 500,000 square
feet of exhibit and pre-function space, 45 meeting rooms, food-service
facilities and a 1,600-car underground parking garage, is the largest exhibition
space between New York City and Washington, D.C. It is located at the base of
the Atlantic City Expressway and opened in May 1997. The old convention center,
built in the late 1920s and located on The Boardwalk, will receive an
approximately $50 million facelift following the opening of the new convention
center and will continue to be used for special events. The State of New Jersey
has commenced a long-term capital plan to upgrade and expand the Atlantic City
International Airport. To date, approximately $18 million has been spent on
renovation of the airport terminal and upgrades of the airport's access roads
and parking facilities.
In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA recently completed the development of the $88
million "Grand Boulevard" corridor that links the new convention center with The
Boardwalk.
Management believes that recent gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment, general
improvement of economic conditions and high occupancy rates, significant
investment in the Atlantic City Market has been initiated and/or announced.
Management believes that these increases in hotel capacity, together with
infrastructure improvements, will be instrumental in stimulating future revenue
growth in the Atlantic City Market. See "--Competition."
Competition
Atlantic City. Competition in the Atlantic City casino hotel market is
intense. Trump Marina competes with other casino hotels located in Atlantic
City, including Trump Plaza and the Taj Mahal which are under the common
ownership of THCR Holdings. At present, there are 12 casino hotels located in
Atlantic City, including Trump Marina, Trump Plaza and the Taj Mahal, all of
which compete for patrons. Trump Marina primarily competes with other Atlantic
City casinos by, among other things, providing superior products and facilities,
premier locations, name recognition and targeted marketing strategies. In
addition, there are several sites on The Boardwalk and in the Marina District on
which casino hotels could be built in the future and various applications for
casino licenses have
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been filed and announcements with respect thereto made from time to time
(including a casino resort by Mirage to be built in the Marina District and a
casino resort by MGM Grand, Inc. to be built on The Boardwalk), although
management is not aware of any current construction on such sites by third
parties. Substantial new expansion and development activity has recently been
completed or has been announced in Atlantic City, including the expansion at
Harrah's, Hilton, Caesar's, Resorts, Tropicana and Bally's Wild West Casino,
which intensifies competitive pressures in the Atlantic City Market. While
management believes that the addition of hotel capacity would be beneficial to
the Atlantic City Market generally, there can be no assurance that such
expansion would not be materially disadvantageous to Trump Marina. There also
can be no assurance that the Atlantic City development projects which are
planned or are underway will be completed.
Trump Marina also competes, or will compete, with facilities in the
northeastern and mid-Atlantic regions of the United States at which casino
gaming or other forms of wagering are currently, or in the future may be,
authorized. To a lesser extent, Trump Marina faces competition from gaming
facilities nationwide, including land-based, cruise line, riverboat and dockside
casinos located in Colorado, Illinois, Indiana, Iowa, Louisiana, Mississippi,
Missouri, Nevada, South Dakota, Ontario (Windsor and Niagara Falls), the
Bahamas, Puerto Rico and other locations inside and outside the United States,
and from other forms of legalized gaming in New Jersey and in its surrounding
states such as lotteries, horse racing (including off-track betting), jai alai,
bingo and dog racing, and from illegal wagering of various types. New or
expanded operations by other persons can be expected to increase competition and
could result in the saturation of certain gaming markets. In September 1995, New
York introduced a keno lottery game, which is played on video terminals that
have been set up in approximately 1,800 bars, restaurants and bowling alleys
across the state. Bay Casino is operating a gambling cruise ship where patrons
are taken from a pier in Sheepshead Bay in Brooklyn, New York to international
waters to gamble. In September 1997, another gambling cruise ship was launched
off the coast of Montauk, New York. On April 24, 1998, Freeport Casino Cruises
began operating a gambling ship in Long Island, New York. Manhattan Cruises, a
company offering gambling cruises departing from Manhattan, New York City since
January 28, 1998, suspended operations in early May 1998, but has announced
plans to resume operations shortly. Other companies (including SeaEscape Casino
Cruises, South Shore Cruise Lines, President Casino and Circle Line) are
currently seeking permission to operate similar cruises in the New York City
area. On December 5, 1997, the mayor of New York City proposed the construction
of a casino on Governors Island, located in the middle of New York Harbor;
however, the proposal would require an amendment to the New York State
Constitution and the sale of the island to New York by the federal government.
In Delaware, a total of approximately 2,000 slot machines were installed at 3
horse racetracks in 1996 and the Delaware legislature recently approved a bill
which would more than double the number of slot machines allowed at the three
racetracks. These slot machines are expected to become operational during the
third quarter of 1998. West Virginia also permits slot machines at racetracks,
and track owners in several other states, including Maryland and Pennsylvania,
are seeking to do the same. In December 1996, the temporary Casino Niagara
opened in Niagara Falls, Ontario. Ontario officials expect that two-thirds of
Casino Niagara's patrons will come from the United States, predominantly from
western New York. In February 1998, the Ontario Casino Commission designated a
consortium whose principal investor is Hyatt Hotels Corporation as the preferred
developer of the permanent Casino Niagara. Moreover, Trump Marina may also face
competition from various forms of internet gambling.
In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, Trump Marina competes directly with Trump Plaza and the Taj Mahal
for gaming patrons.
Other Competition. In addition, Trump Marina faces competition from casino
facilities in a number of states operated by federally recognized Native
American tribes. Pursuant to IGRA, which was passed by Congress in 1988, any
state which permits casino-style gaming (even if only for limited charity
purposes) is required to negotiate gaming compacts with federally recognized
Native American tribes. Under IGRA, Native American tribes enjoy comparative
freedom from regulation and taxation of gaming operations, which provides them
with an advantage over their competitors, including Trump Marina. In March 1996,
the United States Supreme Court struck down a provision of IGRA which allowed
Native American tribes to sue states in federal court for failing to negotiate
gaming compacts in good faith. Management cannot predict the impact of this
decision on the ability of Native American tribes to negotiate compacts with
states.
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In 1991, the Mashantucket Pequot Nation opened Foxwoods, a casino facility
in Ledyard, Connecticut, located in the far eastern portion of such state, an
approximately three-hour drive from New York City and an approximately two and
one-half hour drive from Boston, which currently offers 24-hour gaming and
contains over 5,500 slot machines. An ongoing expansion at Foxwoods will include
an indoor arena, additional hotel rooms, restaurants and retail stores. The
Mashantucket Pequot Nation has also announced plans for a high speed train
linking Foxwoods to the interstate highway and an airport outside Providence,
Rhode Island. In addition, in October 1996, the Mohegan Nation opened the
Mohegan Sun Resort in Uncasville, Connecticut, located 10 miles from Foxwoods.
Developed by Sun International Hotels, Ltd., the Mohegan Sun Resort has 75% of
the gaming capacity of Foxwoods. The Mohegan Nation has announced plans for an
expansion of the casino facilities and the construction of a hotel, convention
center and entertainment center to be completed by the year 2000. In addition,
the Eastern Pequots are seeking formal recognition as a Native American tribe
for the purpose of opening a casino in the North Stonington area. There can be
no assurance that any continued expansion of gaming operations of the
Mashantucket Pequot Nation, the gaming operations of the Mohegan Nation or the
commencement of gaming operations by the Eastern Pequots would not have a
materially adverse impact on the operations of the Partnership.
A group in Cumberland County, New Jersey calling itself the "Nanticoke
Lenni Lenape" tribe has filed a notice of intent with the Bureau of Indian
Affairs seeking formal federal recognition as a Native American tribe. In March
1998, the Oklahoma-based Lenape/Delaware Indian Nation, which originated in New
Jersey and already has federal recognition, filed a lawsuit against the city of
Wildwood claiming that the city is built on ancestral land. The city of
Wildwood, which has supported the plan to build a casino, has entered settlement
negotiations, offering to deed municipal land to the tribe. The plan, which is
opposed by the State of New Jersey, requires state and federal approval. In July
1993, the Oneida Nation opened the Turning Stone, a casino featuring 24-hour
table gaming and electronic gaming systems, but without slot machines, near
Syracuse, New York. The Oneida Nation opened a hotel in October 1997 that
included expanded gaming facilities, and has announced plans to construct a golf
course and convention center. Representatives of the St. Regis Mohawk Nation
signed a gaming compact with New York State officials for the opening of a
casino, without slot machines, in the northern portion of the state close to the
Canadian border. The St. Regis Mohawks are planning to open a casino at the
Monticello Race Track in the Catskill Mountains region of New York; however, any
Native American gaming operation in the Catskills is subject to the approval of
the Governor of New York. The Seneca Nation plans to negotiate with New York
State to open a casino in Western New York; however, the proposed casino would
be subject to the purchase of additional property that is declared reservation
territory by the federal government. The Narragansett Nation of Rhode Island,
which has federal recognition, is seeking to open a casino in Rhode Island;
however, the State of Rhode Island is opposed to the opening of the casino. The
Aquinnah Wampanoag Tribe is seeking to open a casino in southeastern
Massachusetts. Other Native American nations (including the Golden Hill
Paugussett Indians) are seeking federal recognition, land and negotiation of
gaming compacts in New York, Pennsylvania, Connecticut and other states near
Atlantic City.
State Legislation. Legislation permitting other forms of casino gaming has
been proposed, from time to time, in various states, including Maryland and
those states bordering New Jersey. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania. Several states are considering or have approved large scale
land-based casinos. Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Marina could be adversely affected by such
competition, particularly if casino gaming were permitted in jurisdictions near
or elsewhere in New Jersey or in other states in the Northeast. In December
1993, the Rhode Island Lottery Commission approved the addition of slot machine
games on video terminals at Lincoln Greyhound Park and Newport Jai Alai, where
poker and blackjack have been offered for over three years. Currently, casino
gaming, other than Native American gaming, is not allowed in other areas of New
Jersey or in Connecticut, New York or Pennsylvania. On November 17, 1995, a
proposal to allow casino gaming in Bridgeport, Connecticut was voted down by
that state's Senate. On January 28, 1997, the New York State Senate rejected a
constitutional amendment to legalize casino gambling in certain areas of New
York State, effectively postponing any new gambling constitutional amendment
until 1999. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, proposals have been introduced to legalize gaming (including
keno) in other locations, including Philadelphia,
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Pennsylvania. In addition, legislation has from time to time been introduced in
the New Jersey State Legislature relating to types of statewide legalized
gaming, such as video games with small wagers. To date, no such legislation,
which may require a state constitutional amendment, has been enacted. Management
is unable to predict whether any such legislation, in New Jersey or elsewhere,
will be enacted or whether, if passed, would have a material adverse impact on
the Partnership.
Gaming and Other Laws and Regulations
The following is only a summary of the applicable provisions of the Casino
Control Act and certain other laws and regulations. It does not purport to be a
full description thereof and is qualified in its entirety by reference to the
Casino Control Act and such other laws and regulations.
New Jersey Gaming Regulations
In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things: the granting and renewal of
casino licenses; the suitability of the approved hotel facility, and the amount
of authorized casino space and gaming units permitted therein; the qualification
of natural persons and entities related to the casino licensee; the licensing of
certain employees and vendors of casino licensees; the rules of the games; the
selling and redeeming of gaming chips; the granting and duration of credit and
the enforceability of gaming debts; management control procedures, accounting
and cash control methods and reports to gaming agencies; the security standards;
the manufacture and distribution of gaming equipment; the simulcasting of horse
races by casino licensees; equal employment opportunities for employees of
casino operators, contractors of casino facilities and others; and advertising,
entertainment and alcoholic beverages.
Casino Control Commission. The ownership and operations of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under the
Casino Control Act. The CCC is empowered to regulate a wide spectrum of gaming
and non-gaming related activities and to approve the form of ownership and
financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
Operating Licenses. In June 1995, the CCC renewed the Partnership's casino
license and approved Trump as a natural person qualifier through May 1999. This
license is not transferable and its renewal will include a financial review of
the Partnership. Upon revocation, suspension for more than 120 days or failure
to renew a casino license, the Casino Control Act provides for the appointment
of a conservator to take possession of the hotel and casino's business and
property, subject to all valid liens, claims and encumbrances.
Casino License. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion with
regard to the issuance, renewal, revocation and suspension of such licenses and
approvals, which are non-transferable. The qualification criteria with respect
to the holder of a casino license includes its financial stability, integrity
and responsibility; the integrity and adequacy of its financial resources which
bear any relation to the casino project; its good character, honesty and
integrity; and the sufficiency of its business ability and casino experience to
establish the likelihood of a successful, efficient casino operation. The casino
license currently held by the Partnership is renewable for periods of up to four
years. The CCC may reopen licensing hearings at any time, and must reopen a
licensing hearing at the request of the Division of Gaming Enforcement (the
"Division").
Each casino license entitles the holder to operate one casino. Further, no
person may be the holder of a casino license if the holding of such license will
result in undue economic contraction in Atlantic City casino operations by that
person. On May 17, 1995, the CCC adopted a regulation defining the criteria for
determining undue economic concentration which codifies the content of existing
CCC precedent with respect to the subject.
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a superior
first-class facility; and to pay, exchange, refinance or extend debts which will
mature or become due and payable during the license term.
In the event a licensee fails to demonstrate financial stability, the CCC
may take such action as it deems necessary to fulfill the purposes of the Casino
Control Act and protect the public interest, including: issuing
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conditional licenses; approvals or determinations; establishing an appropriate
cure period; imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liability; requiring reasonable reserves
or trust accounts; denying licensure; or appointing a conservator. See
"--Conservatorship."
Management believes that it has adequate financial resources to meet the
financial stability requirements of the CCC for the foreseeable future.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no
entity may hold a casino license unless each officer, director, principal
employee, person who directly or indirectly holds any beneficial interest or
ownership in the licensee, each person who in the opinion of the CCC has the
ability to control or elect a majority of the board of directors of the licensee
(other than a banking or other licensed lending institution which makes a loan
or holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino key
employee.
Control Persons. An entity qualifier or intermediary or holding company,
such as TCHI or Funding, is required to register with the CCC and meet the same
basic standards for approval as a casino licensee; provided, however, that the
CCC, with the concurrence of the Director of the Division, may waive compliance
by a publicly-traded corporate holding company with the requirement that an
officer, director, lender, underwriter, agent or employee thereof, or person
directly or indirectly holding a beneficial interest or ownership of the
securities thereof, individually qualify for approval under casino key employee
standards so long as the CCC and the Director of the Division are, and remain,
satisfied that such officer, director, lender, underwriter, agent or employee is
not significantly involved in the activities of the casino licensee, or that
such security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons holding
five percent or more of the equity securities of such holding company are
presumed to have the ability to control the company or elect one or more of its
directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or any
security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the issuer.
Financial Sources. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of indebtedness,
either in effect or proposed, which bear any relation to any casino project,
including holders of publicly-traded securities of an entity which holds a
casino license or is an entity qualifier, subsidiary or holding company of a
casino licensee (a "Regulated Company"), to qualify as financial sources. In the
past, the CCC has waived the qualification requirement for holders of less than
15% of the Mortgage Notes and the PIK Notes so long as the bonds remained widely
distributed and freely traded in the public market and the holder had no ability
to control the casino licensee. The CCC has, in the past, ruled that the
publicity-traded Mortgage Notes and PIK Notes are widely-distributed and
freely-traded in the public market. The CCC may require holders of less than 15%
of a series of debt to qualify as financial sources even if not active in the
management of the issuer or the casino licensee.
Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company or
property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment advisor registered under the
Investment Advisers Act of 1940, as amended; and such other persons as the CCC
may determine for reasons consistent with the policies of the Casino Control
Act.
An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the
Division that there is any cause to believe that the holder may be found
unqualified, on the basis of CCC findings that: (i) its holdings were purchased
for investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of influencing or affecting the
affairs of the issuer, the casino licensee or its holding or intermediary
companies; provided, however, that the Institutional Investor will be permitted
to vote on matters put to the vote of the outstanding security holders; and (ii)
if (x) the securities are debt securities of
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a casino licensee's holding or intermediary companies or another subsidiary
company of the casino licensee's holding or intermediary companies which is
related in any way to the financing of the casino licensee and represent either
(A) 20% or less of the total outstanding debt of the company or (B) 50% or less
of any issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10% of the equity securities of a casino
licensee's holding or intermediary companies or (z) the securities so held
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an Institutional Investor may be required to produce for the
CCC or the Antitrust Division of the Department of Justice upon request, any
document or information which bears any relation to such debt or equity
securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of and no intention of influencing or affecting, the affairs
of the issuer, the casino licensee or any affiliate; and (iv) if the holder
subsequently determines to influence or affect the affairs of the issuer, the
casino licensee or any affiliate, it shall provide not less than 30 days' prior
notice of such intent and shall file with the CCC an application for
qualification before taking any such action. If an Institutional Investor
changes its investment intent, or if the CCC finds reasonable cause to believe
that it may be found unqualified, the Institutional Investor may take no action
with respect to the security holdings, other than to divest itself of such
holdings, until it has applied for interim casino authorization and has executed
a trust agreement pursuant to such an application. See "--Interim Casino
Authorization."
Ownership and Transfer of Securities. The Casino Control Act imposes
certain restrictions upon the issuance, ownership and transfer of securities of
a Regulated Company, and defines the term "security" to include instruments
which evidence a direct or indirect beneficial ownership or creditor interest in
a Regulated Company including, but not limited to, mortgages, debentures,
security agreements, notes and warrants. Currently, each of Funding and the
Partnership is deemed to be a Regulated Company, and instruments evidencing a
beneficial ownership or creditor interest therein, including partnership
interest, are deemed to be the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not qualified under
the Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the holder
(i) to exercise, directly or through any trustee or nominee, any right conferred
by such securities or (ii) to receive any dividends or interest upon any such
securities or any remuneration, in any form, from its affiliated casino licensee
for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act and
CCC Regulations require that the corporate charter or partnership agreement of a
Regulated Company establish a right in the CCC of prior approval with regard to
transfers of securities, shares and other interests and an absolute right in the
Regulated Company to repurchase at the market price or the purchase price,
whichever is the lesser, any such security, share, or other interest in the
event that the CCC disapproves a transfer. With respect to the publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC, such
holder shall dispose of such securities.
Under the terms of the indentures pursuant to which the Senior Notes, the
Mortgage Notes and the PIK Notes were issued, if a holder of such securities
does not qualify under the Casino Control Act when required to do so, such
holder must dispose of its interest in such securities and the Partnership and
Funding may redeem the securities at the lesser of the outstanding amount or
fair market value.
Interim Casino Authorization. Interim casino authorization is a process
which permits a person who enters into a contract to obtain property relating to
a casino operation or who obtains publicly-traded securities relating to a
casino licensee to close on the contract or own the securities until plenary
licensure or qualification During the period of interim casino authorization,
the property relating to the casino operation or the securities is held in
trust.
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Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already licensed
or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed trust
agreement in a form approved by the CCC. If, after the report of the Division
and a hearing by the CCC, the CCC grants interim authorization, the property
will be subject to a trust. If the CCC denies interim authorization, the
contract may not close or settle until the CCC makes a determination on the
qualifications of the applicant. If the CCC denies qualification, the contract
will be terminated for all purposes and there will be no liability on the part
of the transferor.
If, as a result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee, or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for licensure
or qualification within 30 days after the CCC determines that qualification is
required or declines to waive qualification. The application must include a
fully executed trust agreement in a form approved by the CCC or, in the
alternative, within 120 days after the CCC determines that qualification is
required, the person whose qualification is required must divest such securities
as the CCC may require in order to remove the need to qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued pursuant
to the Casino Control Act; (ii) the casino hotel is an approved hotel in
accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for residency;
and (iv) interim operation will best serve the interest of the public.
When the CCC finds the applicant qualified, the trust will terminate. If
the CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to sell,
assign, convey or otherwise dispose of the property subject to the trust to such
persons who are licensed or qualified or shall themselves obtain interim casino
authorization.
Where a holder of publicly-traded securities is required, in applying for
qualifications as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the trust
is operative, the holder may not participate in the earnings of the casino hotel
or receive any return on its investment or debt security holdings; and (ii)
after disposition, if any, of the securities by the trustee, proceeds
distributed to the unqualified holder may not exceed the lower of their actual
cost to the unqualified holder or their value calculated as if the investment
had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee, such as
the Partnership, to increase its casino space if the licensee agrees to add a
prescribed number of qualifying sleeping units within two years after the
commencement of gaming operations in the additional casino space. However, if
the casino licensee does not fulfill such agreement due to conditions within its
control, the licensee will be required to close the additional casino space, or
any portion thereof that the CCC determines should be closed.
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for durational term
exceeding 30 years, must concern 100% of the entire approved hotel building or
the land upon which it is located and include a buy-out provision conferring
upon the lessee the absolute right to purchase the lessor's entire interest for
a fixed sum in the event that the lessor is founded by the CCC to be unsuitable.
Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at lease 10% of all the
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outstanding equity securities of the casino licensee. Such an agreement shall:
(i) provide for the complete management of the casino; (ii) provide for the
unrestricted power to direct the casino operations; and (iii) provide for a term
long enough to ensure the reasonable continuity, stability and independence and
management of the casino.
License Fees. The CCC is authorized to establish annual fees for the
renewal of casino licenses. The renewal fee is based upon the cost of
maintaining control and regulatory activities prescribed by the Casino Control
Act, and may not be less than $200,000 for a four-year casino license.
Additionally, casino licensees are subject to potential assessments to fund any
annual operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use in
any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1995,
1996 and 1997, the Partnership's gross revenue tax was approximately $21.9
million, $19.9 million and $21.1 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $3.8 million,
$4.0 million and $3.5 million, respectively.
Investment Alternative Tax Obligations. An investment alternative tax
imposed on the gross casino revenues of each licensee in the amount of 2.5% is
due and payable on the last day of April following the end of the calendar year.
A licensee is obligated to pay the investment alternative tax for a period of 30
years. Estimated payments of the investment alternative tax obligation must be
made quarterly in an amount equal to 1.25% of estimated gross revenues for the
preceding three-month period. Investment tax credits may be obtained by making
qualified investments or by the purchase of bonds issued by the CRDA ("CRDA
Bonds"). CRDA Bonds may have terms as long as 50 years and bear interest at
below market rates, resulting in a value lower than the face value of such CRDA
Bonds.
For the first ten years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the amount
of its investments authorized in lieu of such bond investments or made in
projects designed as eligible by the CRDA and (ii) has the option of entering
into a contract with the CRDA to have its tax credit comprised of direct
investments in approved eligible projects which may not comprise more than 50%
of its eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is required to set
aside $100 million for investment in hotel development projects in Atlantic City
undertaken by a licensee which result in the construction or rehabilitation of
at least 200 hotel rooms. These monies will be held to fund up to 35% of the
cost to casino licensees of expanding their hotel facilities to provide
additional hotel rooms, a portion of which will be required to be available upon
the opening of the new Atlantic City convention center and dedicated to
convention events. The CRDA as determined at this time that eligible casino
licensees will receive up to 27% of the cost of additional hotel rooms out of
these monies set aside and may, in the future, increase the percentage to no
greater than 35%.
Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee
was required to pay the New Jersey State Treasurer a $1.50 charge for every use
of a parking space for the purpose of parking motor vehicles in a parking
facility owned or leased by a casino licensee or by any person on behalf of a
casino licensee. This amount is paid into a special fund established and held by
the New Jersey State Treasurer for the exclusive use of the CRDA. The
Partnership currently charges its parking patrons $2.00 in order to make its
required payments to the New Jersey State Treasurer and cover related expenses.
Amounts in the special fund will be expended by the CRDA for eligible projects
in the corridor region of Atlantic City related to improving the highways,
roads, infrastructure, traffic regulation and public safety of Atlantic City or
otherwise necessary or useful to the economic development and redevelopment of
Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and known
as the Atlantic City Fund, its proportional share of an amount related to the
amount by which annual operating expenses of the CCC and the Division are less
than a certain fixed sum. Additionally, a portion of the investment alternative
tax obligation of each casino licensee for the years 1994 through 1998 allocated
for projects in northern New Jersey shall be paid into and credited to the
Atlantic City Fund. Amounts in the Atlantic City Fund will be expended by the
CRDA for economic development projects of a revenue producing nature that foster
the redevelopment of Atlantic City other than the construction and renovation
of casino hotels.
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Conservatorship. If, at any time, it is determined that TCHI, Funding, the
Partnership or any other entity qualifier has violated the Casino Control Act or
that any of such entities cannot meet the qualification requirements of the
Casino Control Act, such entity could be subject to fines or the suspension or
revocation of its license or qualification. If the Partnership's license is
suspended for a period in excess of 120 days or is revoked, or if the CCC fails
or refuses to renew such casino license, the CCC could appoint a conservator to
operate or dispose of the Partnership's casino hotel facilities. A conservator
would be vested with title to all property of the Partnership relating to the
casino and the approved hotel subject to valid liens and/or encumbrances. The
conservator would be required to act under the direct supervision of the CCC and
would be charged with the duty of conserving, preserving, and, if permitted,
continuing the operation of the casino hotel. During the period of the
conservatorship, a former or suspended casino licensee is entitled to a fair
rate of return out of net earnings, if any, on the property retained by the
conservator. The CCC may also discontinue any conservatorship action and direct
the conservator to take such steps as are necessary to effect an orderly
transfer of the property of a former or suspended casino licensee. Such events
could result in an event of default under the indentures pursuant to which the
Senior Notes, the TCHI Notes, the Mortgage Notes and the PIK Notes were issued.
Qualification of Employees. Certain employees of the Partnership must be
licensed by or registered with the CCC, depending on the nature of the position
held. Casino employees are subject to more stringent requirements than
non-casino employees and must meet applicable standards pertaining to financial
stability, integrity and responsibility, good character, honesty and integrity,
business ability and casino experience and New Jersey residency. These
requirements have resulted in significant competition among Atlantic City casino
operators for the services of qualified employees.
Gaming Credit. The Partnership's casino games are conducted on a credit as
well as a cash basis. Gaming debts arising in Atlantic City in accordance with
applicable regulations are enforceable in the courts of the State of New Jersey.
The extension of gaming credit is subject to regulations that detail procedures
which casinos must follow when granting gaming credit and recording counter
checks which have been exchanged, redeemed or consolidated.
Control Procedures. Gaming at Trump Marina is conducted by trained and
supervised personnel. The Partnership employs extensive security and internal
controls. Security checks are make to determine, among other matters, that job
applicants for key positions have had no criminal history or associations.
Security controls utilized by the surveillance department include closed circuit
video cameras to monitor the casino floor and money counting areas. The count of
moneys from gaming is also observed daily by representatives of the CCC.
Other Laws and Regulations
The Treasury has adopted regulations pursuant to which a casino is required
to file a report of each deposit, withdrawal, exchange of currency, gambling
tokens or chips, or other payments or transfers by, through or to such casino
which involves a transaction in currency of more than $10,000 per patron, per
gaming day. Such reports are required to be made on forms prescribed by the
Secretary of the Treasury and are filed with the Internal Revenue Service (the
"Service"). In addition, the Partnership is required to maintain detailed
records (including the names, addresses, social security numbers and other
information with respect to its gaming customers) dealing with, among other
items, the deposit and withdrawal of funds and the maintenance of a line of
credit. The Treasury recently proposed new regulations that would require
casinos to report suspicious transactions involving at least $3,000 in funds or
other assets. The proposed regulations would also require casinos to establish
procedures designed to detect occurrences or patterns of suspicious
transactions. The Partnership cannot at this time determine the final form of
these regulations or the potential impact on its business.
In the past, the Service had taken the position that gaming winnings from
the table games by nonresident aliens were subject to a 30% withholding tax. The
Service, however, subsequently adopted a practice of not collecting such tax.
Recently enacted legislation exempts from withholding tax table game winnings by
nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
The Partnership is subject to other federal, state and local regulations
and, on a periodic basis, must obtain various licenses and permits, including
those required to sell alcoholic beverages in the State of New Jersey as well as
in other jurisdictions. Management believes all required licenses and permits
necessary to conduct its business have been obtained for operations in New
Jersey.
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Properties
The Casino Parcel. Trump Marina is located in the Marina District on an
approximately 14.7 acre triangular-shaped parcel of land, which is owned by the
Partnership in fee, located at the intersection of Huron Avenue and Brigantine
Boulevard directly across from the marina, approximately two miles from The
Boardwalk.
Trump Marina has approximately 75,900 square-feet of gaming space which
accommodates 91 table games, 2,198 slot machines and race simulcasting
facilities. In addition to the casino, Trump Marina consists of a 27-story hotel
with 728 guest rooms, including 185 suites, of which 99 are "Crystal Tower"
luxury suites. Renovation of 300, 210 and 90 of the guest rooms was completed in
1995, 1996 and 1997, respectively. The facility also offers eight restaurants,
540-seat cabaret theater, two cocktail lounges, 58,000 square-feet of
convention, ballroom and meeting space, a swimming pool, tennis courts and a
sports and health club facility. Trump Marina has been designed so that it can
be enlarged in phases into a facility containing 2,000 rooms and a 1,600-seat
cabaret theater. Trump Marina also has a nine-story garage providing on-site
parking for approximately 3,000 vehicles and a helipad which is located atop the
parking garage, making Trump Marina the only Atlantic City casino with access by
land, sea and air.
Between 1994 and 1997, management replaced substantially all of its slot
machines with newer more popular models and upgraded its computerized slot
tracking and slot marketing system. During 1997 the property was rethemed with a
nautical emphasis and renamed Trump Marina. In 1994, management completed a
3,000 square-foot expansion to its casino which enabled Trump Marina to
accommodate the addition of simulcast race track wagering and expended in excess
of $2 million on renovations to its hotel facility. The casino expansion also
increased casino access and casino visibility for hotel patrons. In 1993, Trump
Marina completed the construction of a Las Vegas-style marquee and reader board,
the largest of its kind on the East Coast.
The Marina. Pursuant to an agreement with the New Jersey Division of Parks
and Forestry (the "Marina Agreement"), the Partnership in 1987 began operating
and renovating the marina at Trump Marina, including docks containing
approximately 645 slips. An elevated pedestrian walkway connecting Trump Marina
to a two-story building at the marina was completed in 1989. The Partnership
constructed the two-story building, which contains a 240-seat restaurant and
offices as well as a snack bar and a large nautical theme retail store. Pursuant
to the Marina Agreement and a certain lease between the State of New Jersey, as
landlord, and the Partnership, as tenant, dated as of September 1, 1990 (the
"Marina Lease"), the Partnership commenced leasing the marina and the
improvements thereon for an initial term of twenty-five years. The Marina Lease
is a net lease pursuant to which the Partnership, in addition to the payment of
annual rent equal to the greater of (i) a certain percentage of gross revenues
of the Partnership from operation of the marina during the lease year and (ii)
minimum base rent of $300,000 annually (increasing every five years to $500,000
in 2011), is responsible for all costs and expenses related to the premises,
including but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. Any improvements
made to the marina (which is owned by the State of New Jersey), excluding the
elevated pedestrian walkway, automatically become the property of the State of
New Jersey upon their completion.
The Parking Parcel. The Partnership also owns an employee parking lot
located on Route 30, approximately two miles from Trump Marina, which can
accommodate approximately 1,000 cars.
Legal Proceedings
The Partnership, its partners, certain members of the former Executive
Committee, Funding and certain of their employees are involved in various legal
proceedings. Such persons and entities are vigorously defending the allegations
against them and intend to contest vigorously any future proceedings. The
Partnership and Funding have agreed to indemnify such persons against any and
all losses, claims, damages, expenses (including reasonable costs, disbursements
and counsel fees) and liabilities (including amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties) incurred by them in
said legal proceedings.
On August 14, 1996, certain stockholders of THCR filed two derivative
actions in the Court of Chancery in Delaware (Civil Action Nos. 15148 and 15160)
(the "Delaware cases") against each of the members of the Board of Directors of
THCR, THCR, THCR Holdings, the Partnership and TCI-II. The plaintiffs claim that
the directors of THCR breached their fiduciary duties in connection with the
Castle Acquisition by purchasing these interests at
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an excessive price in a self-dealing transaction. The complaint sought to enjoin
the transaction, and also sought damages and an accounting. The injunction was
never pursued. These plaintiffs served a notice of dismissal in the Delaware
cases on December 29, 1997. The Court of Chancery has not yet ordered the
Delaware cases dismissed.
On October 16, 1996, a stockholder of THCR filed a derivative action in the
United States District Court, Southern District of New York (96 Civ. 7820)
against each member of the Board of Directors of THCR, THCR, THCR Holdings, the
Partnership, TCI, TCI-II, TCHI and Salomon Brothers, Inc ("Salomon"). The
plaintiff claims that certain of the defendants breached their fiduciary duties
and engaged in ultra vires acts in connection with the Castle Acquisition and
that Salomon was negligent in the issuance of its fairness opinion with respect
to the Castle Acquisition. The plaintiff also alleges violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the acquisition agreement by supplying
THCR with untrue information for inclusion in the proxy statement delivered to
THCR's stockholders in connection with the Castle Acquisition. The plaintiff
seeks removal of the directors of THCR, and an injunction, rescission and
damages.
The Delaware cases were amended and refiled in the Southern District of New
York and consolidated with the federal action for all purposes, including
pretrial proceedings and trial. On or about January 17, 1997, the plaintiffs
filed their Consolidated Amended Derivative Complaint (the "First Amended
Complaint"), reflecting the consolidation. On or about March 24, 1997, the
plaintiffs filed their Second Consolidated Amended Derivative Complaint (the
"Second Amended Complaint"). In addition to the allegations made in the First
Amended Complaint, the Second Amended Complaint claimed that certain of the
defendants breached their fiduciary duties and wasted corporate assets in
connection with a previously contemplated transaction with Colony Capital, Inc.
("Colony Capital"). The Second Amended Complaint also included claims against
Colony Capital for aiding and abetting certain of these violations. In addition
to the relief sought in the First Amended Complaint, the Second Amended
Complaint sought to enjoin the previously contemplated transaction with Colony
Capital or, if it was effectuated, to rescind it. On March 27, 1997, THCR and
Colony Capital mutually agreed to end negotiations with respect to such
transaction. On June 26, 1997, plaintiffs served their Third Consolidated
Amended Derivative Complaint (the "Third Amended Complaint"), which omitted the
claims against Colony Capital. THCR and the other defendants in the action moved
to dismiss the Third Amended Complaint on August 5, 1997. The plaintiffs opposed
the defendants' motions to dismiss the Third Amended Complaint by response dated
October 24, 1997. The defendant's reply was served December 9, 1997. By letter
dated April 2, 1998, the plaintiffs sought to amend further the Third Amended
Complaint to add certain additional factual allegations. The defendants opposed
the application, and the Court has not yet ruled on it.
Other Litigation. On March 13, 1997, THCR filed a lawsuit in the United
States District Court, District of New Jersey, against Mirage, the State of New
Jersey ("State"), the New Jersey Department of Transportation ("NJDOT"), the
South Jersey Transportation Authority ("SJTA"), the CRDA, the New Jersey
Transportation Trust Fund Authority and others. THCR was seeking declaratory and
injunctive relief to recognize and prevent violations by the defendants of the
casino clause of the New Jersey State Constitution and various federal
securities and environmental laws relating to proposed infrastructure
improvements in the Atlantic City marina area. While this action was pending,
defendants State and CRDA then filed an action in the New Jersey State Court
seeking a declaratory judgment as to the claim relating to the casino clause of
the New Jersey State Constitution. On May 1, 1997, the United States District
Court dismissed the federal claims and ruled that the State constitutional
claims should be pursued in State Court. On April 2, 1998, the United States
Court of Appeals for the Third Circuit affirmed the dismissal and THCR's
petition to the Third Circuit for a rehearing was denied. On May 14, 1997, the
State Court entered a summary judgment in favor of the State and the CRDA, which
was affirmed by the Appellate Division on March 20, 1998. This decision is
currently being appealed in the State Supreme Court.
On June 26, 1997, THCR filed an action against NJDOT, SJTA, Mirage and
others, in the Superior Court of New Jersey, Chancery Division, Atlantic County
(the "Chancery Division Action"). THCR is seeking to declare unlawful and enjoin
certain actions and omissions of the defendants arising out of and relating to a
certain Road Development Agreement dated as of January 10, 1997, by and among
NJDOT, SJTA and Mirage (the "Road Development Agreement") and the public funding
of a certain road and tunnel project to be constructed in Atlantic City, as
further described in the Road Development Agreement. THCR moved to consolidate
this action with other previously filed related actions. Defendants opposed
THCR's motion to consolidate the Chancery Division Action, initially moved to
dismiss this action on procedural grounds and subsequently moved to dismiss this
action on
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substantive grounds. On October 20, 1997, the Chancery Court denied the
defendants' motion to dismiss this action on procedural grounds, but entered
summary judgment dismissing this action on substantive grounds. This decision is
currently being appealed.
On June 26, 1997, THCR also filed an action, in lieu of prerogative writs,
against the CRDA, in the Superior Court of New Jersey, Law Division, Atlantic
County, seeking review of the CRDA's April 15, 1997 approval of funding ($120
million principal amount plus interest) for the road and tunnel project
discussed above, a declaratory judgment that the said project is not eligible
for such CRDA funding, and an injunction prohibiting the CRDA from contributing
such funding to the said project. Defendant moved to dismiss this action on
procedural grounds and also sought to transfer this action to New Jersey's
Appellate Division. On October 3, 1997, the New Jersey Superior Court
transferred this action to the Appellate Division where it is currently pending.
On September 9, 1997, Mirage filed a complaint against Trump, THCR and
Hilton Hotels Corporation, in the United States District Court for the Southern
District of New York. The complaint seeks damages for alleged violations of
antitrust laws, tortious interference with prospective economic advantage and
tortious inducement of a breach of fiduciary duties arising out of activities
purportedly engaged in by defendants in furtherance of an alleged conspiracy to
impede Mirage's efforts to build a casino resort in the Marina District. Among
other things, Mirage contends that the defendants filed several frivolous
lawsuits and funded others that challenge the proposed state funding mechanisms
for the construction of a proposed roadway and tunnel that would be paid for
chiefly through government funds and which would link the Atlantic City
Expressway with the site of Mirage's proposed new casino resort. On November 10,
1997, THCR and Trump moved to dismiss the complaint and the court has not yet
ruled on it.
Various other legal proceedings are now pending against the Partnership.
The Partnership considers all such proceedings to be ordinary litigation
incident to the character of its business. Management believes that the
resolution of these claims will not, individually or in the aggregate, have a
material adverse effect on the financial condition or results of operations of
the Partnership.
From time to time, the Partnership may be involved in routine
administrative proceedings involving alleged violations of certain provisions of
the Casino Control Act. However, the Partnership believes that the final outcome
of these proceedings will not, either individually or in the aggregate, have a
material adverse effect on the Partnership or on its ability to otherwise retain
or renew any casino or other licenses required under the Casino Control Act for
the operation of Trump Marina.
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MANAGEMENT
Directors and Executive Officers of the Issuers
All decisions affecting the business and affairs of the Partnership,
including the operation of Trump Marina, are decided by the general partner
acting by and through a Board of Partner Representatives, which includes a
minority of Representatives elected indirectly by the holders of the Mortgage
Notes and PIK Notes (the "Noteholder Representatives"). As currently
constituted, the Board of Partner Representatives consists of Messrs. Donald J.
Trump, Chairman, Nicholas L. Ribis, John P. Burke, Robert M. Pickus, Asher O.
Pacholder, Thomas F. Leahy and Arthur S. Bahr. TCHI's Board of Directors
consists of the members of the Board of Partner Representatives.
The sole director of Funding is Trump. Trump also serves as its Chairman of
the Board, President and Treasurer.
Set forth below are the names, ages, positions and offices held with TCHI,
Funding and the Partnership, and a brief account of the business experience
during the past five years of each member of the Board of Partner
Representatives, the executive officers of TCHI, Funding and the Partnership,
and the director of Funding.
Donald J. Trump--Trump, 52 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Trump was a 50%
shareholder, Chairman of the Board of Directors, President and Treasurer of
Trump Plaza GP and the managing general partner of Plaza Associates prior to
June 1993. Trump was Chairman of the Executive Committee and President of Plaza
Associates from May 1986 to May 1992 and was a general partner of Plaza
Associates until June 1993. Trump has been a director of Trump AC Holding since
February 1993 and was President of Trump AC Holding from February 1993 until
December 1997. Trump was a partner in Trump AC from February 1993 until June
1995. Trump has been Chairman of the Board of Directors of Trump AC Funding
since its formation in January 1996 and the Chairman of the Board of Directors
of Trump Atlantic City Funding II, Inc. ("Trump AC Funding II") and Trump
Atlantic City Funding III, Inc. ("Trump AC Funding III") since their formation
in November 1997. Trump has been Chairman of the Board of Directors of THCR
Holding Corp. and THCR/LP since October 1991; President and Treasurer of THCR
Holding Corp. since March 4, 1991; Chairman of the Board of Directors, President
and Treasurer of TCI since June 1988; Chairman of the Executive Committee of Taj
Associates from June 1988 to October 1991; and President and sole Director of
Realty Corp. since May 1986. Trump has been the sole director of TACC since
March 1991. Trump was President and Treasurer of TACC from March 1991 until
December 1997. Trump has been the sole director of Trump Indiana since its
formation. Trump has been Chairman of the Board of Partner Representatives of
the Partnership since May 1992; and was Chairman of the Executive Committee of
the Partnership from June 1985 to May 1992. Trump is the Chairman of the Board
of Directors of Funding and served as President and Treasurer of Funding until
April 1998. Trump is the Chairman of the Board and Treasurer of TCHI. Trump is
the President, Treasurer, sole director and sole shareholder of TCI-II. Trump
has been a Director of THCR Enterprises, Inc., a Delaware corporation ("THCR
Enterprises"), since its formation in January 1997. Trump is also the President
of The Trump Organization, which has been in the business, through its
affiliates and subsidiaries, of acquiring, developing and managing real estate
properties for more than the past five years. Trump was a member of the Board of
Directors of Alexander's Inc. from 1987 to March 1992. Trump was a partner of
Plaza Operating Partners Ltd. when it filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code on November 2, 1992. The plan of
reorganization for Plaza Operating Partners Ltd. was confirmed on December 11,
1992 and declared effective in January 1993.
Nicholas L. Ribis--Mr. Ribis, 53 years old, has been President, Chief
Executive Officer and a director of THCR and THCR Funding and Chief Executive
Officer of THCR Holdings since their formation in 1995. Mr. Ribis has been the
Chief Executive Officer of Plaza Associates since February 1991, was President
from April 1994 to February 1995, was a member of the Executive Committee of
Plaza Associates from April 1991 to May 29, 1992 and was a director and Vice
President of Trump Plaza GP from May 1992 until June 1993. Mr. Ribis served as
Vice President of Trump AC Holding from February 1995 until December 1997. Mr.
Ribis has served as President of Trump AC Holding since December 1997. Mr. Ribis
has served as a director of Trump AC Holding since June 1993. Mr. Ribis has been
Chief Executive Officer, President and a director of Trump AC Funding since its
formation in January 1996 and Chief Executive Officer, President and a director
of Trump AC Funding II and Trump AC Funding III since their formation in
November 1997. Mr. Ribis served as Vice President of TACC until
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December 1997. Mr. Ribis has served as the President of TACC since December
1997. Mr. Ribis has been the President and Chief Executive Officer of Trump
Indiana since its formation. Mr. Ribis has been a Director of THCR/LP and THCR
Holding Corp. since October 1991 and was Vice President of THCR/LP and THCR
Holding Corp. until June 1995; Chief Executive Officer of Taj Associates since
February 1991; Vice President of TCI since February 1991 and Secretary of TCI
since September 1991; Director of Realty Corp. since October 1991; and a member
of the Executive Committee of Taj Associates from April 1991 to October 1991.
Mr. Ribis has served as Vice President of THCR/LP and THCR Holding Corp. since
February 1998. He has also been Chief Executive Officer of the Partnership since
March 1991 and President of the Partnership since April 1998; member of the
Executive Committee of the Partnership from April 1991 to May 1992; member of
the Board of Partner Representatives of the Partnership since May 1992; and
served as the Vice President and Assistant Secretary of TCHI from December 1993
and January 1991, respectively, until April 1998. Mr. Ribis is now a director of
TCHI. Since April 1998, Mr. Ribis has served as President and Chief Executive
Officer of TCHI and Funding. Mr. Ribis has served as Vice President of TCI-II
since December 1993 and had served as Secretary of TCI-II from November 1991 to
May 1992. Mr. Ribis has been Vice President of Trump Corp. since September 1991.
Mr. Ribis has been the President and a director of THCR Enterprises since
January 1997. From January 1993 to January 1995 Mr. Ribis served as the Chairman
of the Casino Association of New Jersey and has been a member of the Board of
Trustees of the CRDA since October 1993. From January 1980 to January 1991, Mr.
Ribis was Senior Partner in, and from February 1991 to December 1995, was
Counsel to the law firm of Ribis, Graham & Curtin (now practicing as Graham,
Curtin & Sheridan, A Professional Association), which serves as New Jersey legal
counsel to all of the above-named companies and certain of their affiliated
entities.
Robert M. Pickus--Mr. Pickus, 43 years old, has been Executive Vice
President and Secretary of THCR since its formation in 1995. He has also been
the Executive Vice President of Corporate and Legal Affairs of Plaza Associates
since February 1995. From December 1993 to February 1995, Mr. Pickus was the
Senior Vice President and General Counsel of Plaza Associates. Mr. Pickus served
as the Assistant Secretary of Trump AC Holding from April 1994 until February
1998. Since February 1998, Mr. Pickus has served as the Secretary of Trump AC
Holding. Mr. Pickus has been Secretary and a director of Trump AC Funding since
its formation in January 1996 and Secretary and a director of Trump AC Funding
II and Trump AC Funding III since their formation in November 1997. Mr. Pickus
has been the Executive Vice President and Secretary of Trump Indiana since its
inception. Mr. Pickus has been the Executive Vice President of Corporate and
Legal Affairs of Taj Associates since February 1995, and a Director of THCR
Holding Corp. and THCR/LP since November 1995. He was the Senior Vice President
and Secretary of Funding from June 1988 to December 1993 and General Counsel of
the Partnership from June 1985 to December 1993. Mr. Pickus has served as the
Secretary of Funding since April 1998. Mr. Pickus served as the Assistant
Secretary of TACC until February 1998. Since February 1998, Mr. Pickus has
served as the Secretary of TACC. Mr. Pickus was also Secretary of TCHI from
October 1991 until December 1993. Mr. Pickus is a director of TCHI, and served
as the Assistant Secretary of TCHI from February 1998 until April 1998. Since
April 1998, Mr. Pickus has served as the Secretary of TCHI. Mr. Pickus has been
the Executive Vice President of Corporate and Legal Affairs of the Partnership
since February 1995, Secretary of the Partnership since February 1996 and a
member of the Board of Partner Representatives of the Partnership since October
1995. Mr. Pickus is currently the Secretary of THCR Holding Corp., has been the
Vice President, Secretary and Director of THCR Enterprises since January 1997
and has been Executive Vice President of TCS since its inception.
John P. Burke--Mr. Burke, 50 years old, served as the Senior Vice President
of Corporate Finance of THCR from January 1996 until June 1997. Mr. Burke has
served as the Senior Vice President of THCR, THCR Holdings and THCR Funding
since June 1997. Mr. Burke has been the Corporate Treasurer of THCR, THCR
Holdings and THCR Funding since their formation in 1995. He has also been
Corporate Treasurer of Plaza Associates and Taj Associates since October 1991.
Mr. Burke has been the Treasurer of Trump Indiana since its formation Mr. Burke
has been Treasurer of Trump AC Funding since its formation in January 1996 and
Treasurer of Trump AC Funding II and Trump AC Funding III since their formation
in November 1997. Mr. Burke has been Treasurer of TACC since February 1998. Mr.
Burke was a Director of THCR/LP and THCR Holding Corp. from October 1991 to
April 1996 and was Vice President of THCR/LP until June 1995. Mr. Burke has
served as the Assistant Treasurer of THCR Holding Corp. and THCR/LP since
February 1998. Mr. Burke has been the Corporate Treasurer of the Partnership
since October 1991, the Vice President of the Partnership, Funding, TCI-II and
TCHI since December 1993, Assistant Treasurer of TCHI since April 1998,
Treasurer of Funding since April 1998, a member of the Board of Partner
Representatives of the Partnership since March 1997 and the Vice
President-Finance of The Trump
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Organization since September 1990. Mr. Burke was an Executive Vice President and
Chief Administrative Officer of Imperial Corporation of America from April 1989
through September 1990. Mr. Burke has been the Vice President and Treasurer of
THCR Enterprises since January 1997.
Asher O. Pacholder--Dr. Pacholder, 60 years old, has been a partner
representative of the Board of Partner Representatives since May 1992. Dr.
Pacholder served as a director and the President of TCI-II from May 1992 to
December 1993. He has served as the Chairman of the Board of Directors and Chief
Financial Officer of ICO, Inc., an oil field services and petrochemicals
processing company, since February 1995 and Chief Operating Officer and a
director of Wedco Technology, Inc. since May of 1996. Dr. Pacholder has served
as Chairman of the Board and Managing Director of Pacholder Associates, Inc., an
investment advisory firm, since 1983. In addition,Dr. Pacholder is Chairman of
the Board of Directors of USF&G Pacholder Fund, Inc., a closed-end investment
company, and he serves on the Board of Directors of Southland Corporation, which
owns and operates convenience stores.
Thomas F. Leahy--Mr. Leahy, 60 years old, has been a partner representative
on the Board of Partner Representatives since June 1993. Mr. Leahy served as a
director and Treasurer of TCI-II from May 1992 to December 1993. From 1991 to
July 1992, Mr. Leahy served as Executive Vice President of CBS Broadcast Group,
a unit of CBS, Inc. Mr. Leahy retired from CBS, Inc. in 1992, having served in
various executive capacities over a 30-year period. Since November 1992, Mr.
Leahy has served as President of The Theater Development Fund, a service
organization for the performing arts. Since July 1992, Mr. Leahy has served as
Chairman of VT Properties, Inc., a privately-held corporation which invests in
literary, stage and film properties.
Arthur S. Bahr--Mr. Bahr, 66 years old, has been a partner representative
on the Board of Partner Representatives since June 1995 and previously served as
a director of TCI-II from August 1993 to January 1994. Mr. Bahr retired in
February 1994 after serving in various senior investment positions for General
Electric Investment Corporation since 1970. Mr. Bahr serves on the Board of
Directors of Renaissance Reinsurance and the Korean International Investment
Fund.
Mark A. Brown--Mr. Brown, 37 years old, joined the Partnership as Executive
Vice President of Operations in July 1995 and, effective November 1997, serves
as President and Chief Operating Officer. Previously, Mr. Brown served as Senior
Vice President of Eastern Operations for Caesar's World Marketing Corporation,
National and International Divisions from 1993 until 1995. Prior to that, Mr.
Brown served as Vice President of Casino Operations at the Taj Mahal from 1989
until 1993. From 1979 until 1989, Mr. Brown worked for Resorts International
Hotel Casino departing as Casino Shift Manager in December 1989.
Each member of the Board of Partner Representatives and all of the other
persons listed above have been licensed or found qualified by the CCC.
The employees of the Partnership serve at the pleasure of the Board of
Partner Representatives subject to any contractual rights contained in any
employment agreement.
Executive Compensation
Executive officers of Funding do not receive any additional compensation
for serving in such capacity. In addition, Funding and the Partnership do not
offer their executive officers stock option or stock appreciation right plans,
long-term incentive plans or defined benefit pension plans.
Summary Compensation Table. The following table sets forth compensation
paid or accrued during the years ended December 31, 1997, 1996 and 1995 to the
Chairman of the Board of Partner Representatives, the Chief Executive Officer,
all of the executive officers of the Partnership whose cash compensation,
including bonuses and deferred compensation, exceeded $100,000 for the year
ended December 31, 1997 and one additional individual who would have been among
the four most highly paid executive officers but for he was not employed on
December 31, 1997 by the Partnership. Compensation accrued during one year and
paid in another is recorded under the year of accrual. Information relating to
long-term compensation is inapplicable and has therefore been omitted from the
table.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)
-------------------------------
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation
- ------------------ ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Donald J. Trump ...................... 1997 -- -- -- --
Chairman of the Board 1996 -- -- -- --
1995 -- -- -- $2,087,000(2)
Nicholas L. Ribis .................... 1997 $399,300 -- -- $950(3)
Chief Executive Officer 1996 499,125 -- -- 594(3)
1995 531,895 -- -- 647(3)
John P. Belisle(4) ................... 1997 $380,776 -- -- $3,835(3)
Former President and Chief 1996 -- -- -- --
Operating Officer 1995 -- -- -- --
Mark A. Brown(5) ..................... 1997 $352,383 $75,000 -- $2,375(3)
President and Chief Operating 1996 359,160 75,000 -- 2,375(3)
Officer 1995 155,257 150,000 -- 2,187(3)
R. Bruce McKee(6) .................... 1997 $262,949 $10,000 -- $2,969(3)
Senior Vice President of 1996 62,926 -- -- --
Corporate Finance 1995 -- -- -- --
Patricia M. Wild(7) .................. 1997 $135,920 -- -- $3,375(3)
Assistant Secretary and Vice 1996 138,530 -- -- 3,420(3)
President of Legal Affairs 1995 126,368 -- -- 3,638(3)
</TABLE>
- ----------
(1) Represents the dollar value of annual compensation not properly categorized
as salary or bonus, including amounts reimbursed for income taxes and
director's fee. Following rules of the Commission, perquisites and other
personal benefits are not included in this table of the aggregate amount if
that compensation is the lesser of either $50,000 or 10% of the total
salary and bonus for that officer.
(2) Represents amounts paid under the Services Agreement. In addition, Trump
was reimbursed $273,000 and $184,000 in 1996 and 1995, respectively, for
expenses incurred pursuant to the Services Agreement. No such
reimbursements were made during 1997.
(3) Represents vested and unvested contributions made by the Partnership under
the Trump's Castle Hotel & Casino Retirement Savings Plan. Funds
accumulated for an employee, which consist of a certain percentage of the
employee's compensation plus Partnership contributions equaling 50% of the
participant's contributions, are retained until termination of employment,
attainment of age 59 1/2 or financial hardship, at which time the employee
may withdraw his or her vested funds.
(4) Mr. Belisle commenced employment with the Partnership during February 1997
and served as President and Chief Operating Officer from June 1997 through
November 1997. Mr. Belisle resigned effective July 27, 1998.
(5) Mr. Brown became the Executive Vice President of Operations effective July
1995 and has served as President and Chief Operating Officer effective
November 1997.
(6) Mr. McKee served as President and Chief Operating Officer of the
Partnership from October 1996 through June 1997. Effective June 1997, Mr.
McKee has served as Senior Vice President of Corporate Finance of THCR,
Trump Atlantic City Funding, Inc. and Trump Atlantic City Corporation
("TACC"). Effective December 1997, Mr. McKee has served as Senior Vice
President of Corporate Finance of Trump Atlantic City Funding II, Inc. and
Trump Atlantic City Funding III, Inc. Mr. KcKee resigned effective
September 7, 1998.
(7) Ms. Wild resigned effective March 1998.
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Employment Agreements
Mr. Ribis had an employment agreement with Partnership pursuant to which
Mr. Ribis acted as Chief Executive Officer of the Partnership. The agreement
provided that in the event the Partnership, or any entity which acquires
substantially all of the equity interests or assets of the Partnership, proposes
to engage in an offering of common shares to the public, the Partnership and Mr.
Ribis would agree to negotiate new compensation arrangements which shall include
equity participation for Mr. Ribis. This agreement was terminated upon
consummation of the Castle Acquisition and now Mr. Ribis is compensated for his
services to the Partnership under an employment agreement with THCR and THCR
Holdings (the "Ribis THCR Agreement"). Under the Ribis THCR Agreement, Mr.
Ribis's annual salary is $1,996,500. Mr. Ribis's annual salary is paid on an
allocation basis by THCR, Taj Associates, Plaza Associates and the Partnership.
Taj Associates had an employment agreement with R. Bruce McKee pursuant to
which he served as Senior Vice President and Chief Financial Officer of Taj
Associates which expired on September 30, 1997.
The Partnership, on March 6, 1998, entered into an employment agreement
with Mark A. Brown (the "Brown Agreement") pursuant to which Mr. Brown serves as
the Partnership's President and Chief Operating Officer. The Brown Agreement
expires on December 31, 2000 unless terminated early by the Partnership for
Cause (as defined in the Brown Agreement) or terminated by Mr. Brown upon the
occurrence of a Change of Control (as defined in the Brown Agreement). The Brown
Agreement provides for an annual base salary of $450,000 in 1998, $475,000 in
1999 and $500,000 in 2000.
Compensation of the Board of Directors
Each Partner Representative of the Partnership (other than Messrs. Trump,
Ribis, Burke and Pickus) receives an annual fee of $50,000. In addition, each
Partner Representative of the Partnership (other than Messrs. Trump, Ribis,
Pickus and Burke) receives $2,500 per meeting attended, plus reasonable
out-of-pocket expenses incurred in attending any meeting of the Board of Partner
Representatives.
Compensation Committee Interlocks and Insider Participation
In general, the compensation of executive officers of the Partnership is
determined by the Board of Partners Representatives, which is composed of Trump,
Nicholas L. Ribis, John P. Burke, Asher O. Pacholder, Thomas F. Leahy, Arthur S.
Bahr and Robert M. Pickus. The compensation of Nicholas L. Ribis is set forth in
his employment agreement. The Partnership has delegated the responsibility over
certain matters, such as the bonus of Mr. Ribis, to Trump. Executive officers of
Funding do not receive any additional compensation for serving in such capacity.
Castle Acquisition. On October 7, 1996, THCR Holdings acquired from Trump
all of the outstanding equity of the Partnership. See "Business--Trump
Marina--Historical Background--Castle Acquisition."
Services Agreement. On December 28, 1993, the Partnership entered into a
Services Agreement with TCI-II (the "Services Agreement"). In general, the
Services Agreement obligates TCI-II to provide to the Partnership, from time to
time when reasonably requested, consulting services on a non-exclusive basis,
relating to marketing, advertising, promotional and other services (the
"Services") with respect to the business and operations of the Partnership, in
exchange for certain fees to be paid only in those years in which EBITDA (EBITDA
represents income from operations before depreciation, amortization,
restructuring costs and the non-cash write-down of CRDA investments) exceeds
prescribed amounts.
In consideration for the Services to be rendered by TCI-II, the Partnership
will pay an annual fee (which is identical to the fee which was payable under
the previously existing management agreement) to TCI-II in the amount of $1.5
million for each year in which EBITDA exceeds the following amounts for the
years indicated: 1993-$40.5 million; 1994-$45.0 million; 1995 and
thereafter-$50.0 million. If EBITDA in any fiscal year does not exceed the
applicable amount, no annual fee is due. In addition, TCI-II will be entitled to
an incentive fee beginning with the fiscal year ending December 31, 1994 in an
amount equal to 10% of EBITDA in excess of $45.0 million for such fiscal year.
The Partnership will also be required to advance to TCI-II $125,000 a month
which will be applied toward the annual fee, provided, however, that no advances
will be made during any year if and for so long as the Managing Partner (defined
in the Services Agreement as Trump) determines, in his good faith reasonable
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judgment, that the Partnership's budget and year-to-date performance indicate
that the minimum EBITDA levels (as specified above) for such year will not be
met. If for any year during which annual fee advances have been made it is
determined that the annual fee was not earned, TCI-II will be obligated to
promptly repay any amounts previously advanced. For purposes of calculating
EBITDA under the Services Agreement, any incentive fees paid in respect of 1994
or thereafter shall not be deducted in determining net income. During the year
ended 1997,there were no fees payable by the Partnership under the Services
Agreement. As the Partnership did not meet the required level of EBITDA during
1996, the monthly advances to TCI-II related to the Services Agreement were
suspended and on October 6, 1996, the Partnership recorded a receivable in the
amount of $1.25 million which represents the amounts advanced to TCI-II during
the year. The Services Agreement expires on December 31, 2005.
Trump has granted the Partnership a license to use the Marks in connection
with the operations of Trump Marina since June 17, 1985. The license expires on
August 15, 1998. See "Business--Trademark/Licensing."
Other Relationships. The Commission requires registrants to disclose the
existence of any other corporation in which both (i) an executive officer of the
registrant serves on the board of directors and/or compensation committee, and
(ii) a director of the registrant serves as an executive officer. Messrs. Ribis,
Pickus and Burke, executive officers of the Partnership, serve on the Board of
Directors of other entities in which members of the Board of Partner
Representatives (namely, Messrs. Trump, Ribis, Burke and Pickus) serve and
continue to serve as executive officers. The Partnership believes that such
relationships have not affected the compensation decisions made by the Board of
Partner Representatives in the last fiscal year.
Trump serves on the Board of Directors of TACC, a general partner of Plaza
Associates, of which Messrs. Trump, Ribis and Pickus are executive officers.
Messrs. Trump and Ribis also serve on the Board of Directors of Trump Atlantic
City Holding, Inc., of which Messrs. Trump, Ribis and Burke are also executive
officers. Trump is the sole director of TACC, of which Messrs. Trump, Ribis and
Pickus are executive officers. Trump is not compensated by such entities for
serving as an executive officer, however, he has entered into a personal
services agreement with the Plaza Associates and THCR. Messrs. Ribis and Burke
are not compensated by the foregoing entities, however, they are compensated by
Plaza Associates for their service as executive officers.
Messrs. Trump, Ribis, Pickus and Burke serve on the Board of Directors of
THCR Holding Corp., which held, prior to April 17, 1996, an indirect equity
interest in Taj Associates, of which Trump is an executive officer. Such persons
also serve on the Board of Directors of THCR/LP, the former managing general
partner of Taj Associates, of which Messrs. Trump and Ribis are executive
officers.
Mr. Ribis also serves on the Board of Directors of Realty Corp. which,
prior to April 17, 1996, leased certain real property to Taj Associates, of
which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Realty Corp.
Messrs. Trump and Ribis serve on the Board of Directors of THCR of which
Trump is Chairman of the Board. Messrs. Ribis, Pickus and Burke are executive
officers of THCR and are compensated for their services by THCR.
John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to the
Partnership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Affiliate party transactions are governed by the provisions of the
indentures pursuant to which the Notes, the Mortgage Notes and the PIK Notes
were issued, which provisions generally require that such transactions be on
terms as favorable as would be obtainable from an unaffiliated party, and
require the approval of a majority of the Noteholder Representatives of the
Board of Partner Representatives for certain affiliated transactions.
Trump, Ribis and certain affiliates have engaged in certain related party
transactions with respect to the Partnership. See "Management--Compensation
Committee Interlocks and Insider Participation--Other Relationships."
The Partnership has joint insurance coverage with Taj Associates and Plaza
Associates, for which the annual premiums paid by the Partnership, Taj
Associates and Plaza Associates were approximately $4.0 million for the year
ending December 31, 1997.
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Plaza Associates leased portions of its warehouse facility located in Egg
Harbor Township, New Jersey to the Partnership. Lease payments by the
Partnership to Plaza Associates totaled $5,000 in 1996. The Partnership did not
make any lease payments to Plaza Associates in 1997.
The Partnership has entered into a services agreement with TCS pursuant to
which TCS provides the Partnership with certain management, financial and other
functions and services necessary and incidental to the operations of Trump
Marina.
STOCK OWNERSHIP
The general partner of the Partnership is TCHI, a New Jersey corporation,
and the limited partner of the Partnership is THCR Holdings, a Delaware limited
partnership. TCHI is wholly owned by THCR Holdings. THCR Holdings is a Delaware
limited partnership which is owned approximately 63% by THCR as both a general
and limited partner, and approximately 37% by Trump. Funding is a wholly owned
subsidiary of the Partnership.
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DESCRIPTION OF THE SENIOR NOTES
The Series A Senior Notes were, and Series B Senior Notes offered hereby
will be, issued under the Senior Note Indenture, dated as of April 17, 1998, by
and among Funding, as issuer, the Partnership, as guarantor, and U.S. Bank
National Association, as Senior Note Trustee, a copy of the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Senior Notes are issued in an aggregate principal amount of $62.0
million. The form and terms of the Series B Senior Notes will be identical in
all material respects to the form and terms of the Series A Senior Notes, except
for certain registration rights which will terminate upon consummation of the
Exchange Offer. See "Prospectus Summary--Terms of the Notes." The Senior Note
Indenture is subject to and is governed by the Trust Indenture Act. The
following is only a summary of the material provisions of the Senior Note
Indenture and the Senior Mortgage Documents (as defined) as they relate to the
Senior Notes and does not purport to be complete, and where reference is made to
particular provisions of the Senior Note Indenture or the Senior Mortgage
Documents, such provisions, including the definitions of certain terms, are
qualified in their entirety by reference to all the provisions of the Senior
Note Indenture and the Senior Mortgage Documents and those terms made a part of
the Senior Note Indenture and the Senior Mortgage Documents by the Trust
Indenture Act. Unless otherwise specified, references to Articles and Sections
are to Articles and Sections of the Senior Note Indenture.
General
The Senior Notes mature on April 30, 2003. Each Senior Note bears interest
payable in cash at the rate of 10 1/4%, payable semiannually in arrears on April
30 and October 31 each year, commencing October 31, 1998, to the Person in whose
name the Senior Note (or any predecessor Senior Note) is registered at the close
of business on the April 15 or October 15 next preceding such Interest Payment
Date. Senior Notes will be issuable only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. (Section 3.2)
Payment of the Senior Notes is guaranteed by the Partnership and the Senior
Notes are secured by the Senior Mortgage Documents. See "--Security" and
"--Guarantee."
Principal of, premium, if any, and interest on, the Senior Notes are
payable, and the Senior Notes are exchangeable and transferable, at the office
or agency of Funding in The City of New York maintained for such purpose (which
initially will be the Corporate Trust Office of the Senior Note Trustee or its
agent); provided, however, that payment of interest may be made at the option of
Funding by check mailed to each holder of Senior Notes at his registered
address. The Senior Notes may be presented for registration of transfer and
exchange at such office of the Senior Note Trustee. No service charge will be
made for any registration of transfer, exchange or redemption of Senior Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Section 3.5)
Guarantee
The obligations of Funding to pay the principal of, premium, if any, and
interest on, the Senior Notes are unconditionally guaranteed by a non-recourse
Senior Guarantee of the Partnership. The Senior Guarantee is secured by the
Senior Guarantee Mortgage on the assets of the Partnership, as described under
"--Security," pari passu with the lien of the Senior Note Mortgage and the liens
securing the TCHI Notes.
Security
The Senior Notes are secured by an assignment by Funding to the Senior Note
Trustee, for the benefit of the holders of the Senior Notes, of (a) the Senior
Partnership Note and (b) the Senior Note Mortgage (the Senior Partnership Note,
the Senior Note Mortgage, the Senior Guarantee Mortgage (which has been made
directly to the Senior Note Trustee) and any ancillary documents executed by
Funding, the Partnership or the Senior Note Trustee for purposes of providing
security for the benefit of the holders of the Senior Notes are referred to
herein as the "Senior Mortgage Documents"), which encompasses a lien on (i)
Trump Marina and the leasehold and fee interests of the Partnership in the land
on which Trump Marina and its ancillary facilities are located, including
certain additions and improvements constructed thereon, and (ii) substantially
all the other assets of the Partnership (collectively, the "Collateral").
The Senior Partnership Note contains interest, principal, redemption and
default terms which are virtually identical to those of the Senior Notes. The
Senior Note Mortgage encumbers the Partnership's interest in Trump Marina and in
all other facilities owned by or leased to the Partnership, including certain
additions and
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improvements thereto and (except, in certain circumstances, as permitted by the
Senior Note Mortgage, where such property is financed) substantially all
furniture, furnishings, fixtures, machinery and equipment at any time forming a
part thereof, or used in connection therewith. The Senior Note Mortgage
constitutes a lien and security interest on Trump Marina and such other assets,
subject to the prior liens securing permitted encumbrances and pari passu with
liens securing the TCHI Notes and the remainder of the Working Capital Facility,
if incurred. See "Risk Factors--Limitations on Ability to Realize on
Collateral."
The Partnership has also executed the Senior Guarantee Mortgage in favor of
the Senior Note Trustee. The Senior Guarantee Mortgage secures the obligations
of the Partnership under the Senior Guarantee. The lien of the Senior Guarantee
Mortgage is pari passu with the lien of the Senior Note Mortgage. The Senior
Note Mortgage and the Senior Guarantee Mortgage have substantially identical
terms, secure essentially the same debt and constitute a lien on the same
assets. They have both been executed so as to provide to the Senior Note Trustee
and the holders of the Senior Notes alternative remedies, such that in the event
legal or equitable defenses were successfully raised against enforcement of one
of the mortgages, foreclosure could nevertheless be pursued under the other
mortgage.
Certain of the Partnership's intangible assets that may be significant to
its operations, such as computer software licenses, are by their terms not
assignable and, accordingly, are not included in the property subject to the
Senior Note Mortgage and the Senior Guarantee Mortgage.
Ranking
In connection with the Initial Offering and the related refinancing, the
Partnership entered into an Intercreditor Agreement with the Senior Note
Trustee, the TCHI Note Trustee, the trustee under the Mortgage Note Indenture
(the "Mortgage Note Trustee") and the trustee under the PIK Note Indenture (the
"PIK Note Trustee") pursuant to which the Partnership agreed not to make any
payments with respect to the Mortgage Notes and the PIK Notes, and the Mortgage
Note Trustee and the PIK Note Trustee have each been prohibited from realizing
on the collateral with respect to the Mortgage Notes and the PIK Notes, for so
long as there exists any payment default on the Senior Notes or the TCHI Notes.
As of April 30, 1998, there is an aggregate principal amount of $62.0 million in
Senior Notes outstanding and an aggregate principal amount of $5.0 million in
TCHI Notes outstanding.
Funding is prohibited from incurring additional Indebtedness other than
Indebtedness with respect to the Senior Notes, the Mortgage Notes, the PIK Notes
and any intercompany loan from the Partnership and the Partnership is subject to
restrictions on the incurrence of any additional Indebtedness. See "--Certain
Covenants--Limitation on Indebtedness" and "--Certain Covenants--Limitation on
Activities and Investments."
Non-Recourse
The Senior Note Indenture provides that, notwithstanding anything therein
or in any other agreement, document, certificate, instrument, statement or
omission referred to below to the contrary, the Partnership and Funding are
liable thereunder only to the extent of the assets of the Partnership and
Funding and the interest of Funding in the Senior Notes, and no other person or
entity, including, but not limited to, any partner, officer, committee or
committee member of the Partnership or any Partner therein or of any Affiliate
of the Partnership (or of any other obligor on the Senior Notes), or any
incorporator, officer, director or shareholder of Funding, or any Affiliate or
controlling person or entity of any of the foregoing, or any agent, employee or
lender of any of the foregoing, or any successor, personal representative, heir
or assign of any of the foregoing, in each case past, present or as they may
exist in the future, shall be liable in any respect (including, without
limitation, for the breach of any representation, warranty, covenant, agreement,
condition or indemnification or contribution undertaking contained therein)
under, in connection with, arising out of, or relating to the Senior Note
Indenture, or any other agreement, document, certificate, instrument or
statement (oral or written) related to, executed or to be executed, delivered or
to be delivered, or made or to be made, or any omission made or to be made, in
connection with any of the foregoing or any of the transactions contemplated in
any such agreement, document, certificate, instrument or statement.
Notwithstanding the foregoing, the holders of the Senior Notes preserve any
personal claims they may have for fraud, liabilities under the Securities Act,
and other liabilities that cannot be waived under the applicable federal and
state laws in connection with the purchase of the Senior Notes; provided,
however, that such conduct will not constitute an Event of Default under the
Senior Note Indenture, the Senior Notes or the Senior Note Mortgage or any
document executed in conjunction therewith or otherwise related thereto.
(Section 3.11)
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Mandatory Redemption
Pursuant to the Casino Control Act, Funding or the Partnership may redeem
Senior Notes at the lower of the Outstanding Amount (as defined in the Senior
Note Indenture) or the Fair Market Value (as defined in the Senior Note
Indenture) thereof held by Persons that are found by the CCC not to be qualified
to hold such securities and who fail to dispose of such securities within 30
days after notice of such finding. (Section 11.1)
Subject to the rights of the holders of the Senior Indebtedness, Funding or
the Partnership must also redeem the Senior Notes at the principal amount
thereof, without premium, plus accrued and unpaid interest, at any time as a
result of a Total Taking or Casualty. (Section 11.3)
Optional Redemption
Funding and the Partnership may at their election redeem all, but not less
than all, of the Senior Notes at 100% of the principal amount thereof, together
with accrued and unpaid interest through the redemption date, provided that no
redemption of the Senior Notes may be made unless the Partnership or TCHI
concurrently redeems all of the TCHI Notes pursuant to the TCHI Note Indenture.
(Section 11.2)
Certain Covenants
The Senior Note Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Partnership will not, and will not permit
its Subsidiaries to, create, incur, assume, or directly or indirectly guaranty
or in any other manner become directly or indirectly liable with respect to any
Indebtedness (including Acquired Indebtedness, but excluding Permitted
Indebtedness) unless, in the case of Indebtedness of the Partnership and
Acquired Indebtedness, (a) the Partnership's Consolidated Fixed Charge Coverage
Ratio for the four full fiscal quarters immediately preceding such event, taken
as one period (and after giving pro forma effect to: (i) the incurrence of such
Indebtedness, and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness were incurred
and the application of such proceeds occurred at the beginning of such
four-quarter period; (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Partnership or the Subsidiaries since the first day of such
four-quarter period as if such Indebtedness were incurred, repaid or retired at
the beginning of such four-quarter period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such four-quarter period); and (iii) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed by the
Partnership or the Subsidiaries, as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred at the
beginning of such four-quarter period), would have been at least equal to 1.75
to 1 and (b) except in the case of Permitted Indebtedness, Acquired Indebtedness
or Pari Passu Indebtedness, such Indebtedness created, incurred, assumed or
guaranteed pursuant to this section, (i) has an Average Life to Stated Maturity
that exceeds the remaining Average Life to Stated Maturity of the Senior Notes
and (ii) has a Stated Maturity for its final scheduled principal payment later
than the Stated Maturity for the final scheduled principal payment of the Senior
Notes and (c) if such Indebtedness created, incurred, assumed or guaranteed
pursuant to this section is Pari Passu Indebtedness which is not Permitted
Indebtedness or Acquired Indebtedness, such Indebtedness will have (i) an
Average Life to Stated Maturity no shorter than the remaining Average Life to
Stated Maturity of the Senior Notes and (ii) a Stated Maturity for its final
scheduled principal payment that is not earlier than the Stated Maturity for the
final scheduled principal payment of the Senior Notes. (Section 10.7).
Limitation on Liens. Neither Funding nor the Partnership will, nor will any
of the Subsidiaries be permitted to, create, incur, assume or suffer to exist
any Liens, other than (a) the Lien of the Senior Mortgage Documents and (b)
Permitted Liens. (Section 10.8)
Limitation on Restricted Payments. Neither Funding nor the Partnership
will, and will not permit any of the Subsidiaries to, directly or indirectly:
(i) declare or make any distribution on Funding's Capital Stock or the
Partnership's Equity Interests, as the case may be (other than
distributions payable in Funding's Qualified Capital Stock or the
Partnership's Qualified Equity Interests or in options, warrants or other
rights to purchase such Qualified Capital Stock or Qualified Equity
Interests);
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(ii) purchase, redeem or otherwise acquire or retire for value any
such Capital Stock or Equity Interests, or any options, warrants or other
rights to acquire such Capital Stock or Equity Interests;
(iii) make any principal payment on or redeem, repurchase, defease or
otherwise acquire or retire for value prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Pari Passu
Indebtedness (other than Permitted Indebtedness) or Subordinated
Indebtedness of the Partnership (other than pursuant to clause (C) below);
or
(iv) incur, create, assume or suffer to exist any guaranty (other than
guarantees existing on the date of the Senior Note Indenture and any
renewals, extensions, substitutions, refinancings or replacements of such
guarantees) of Indebtedness of any Affiliate of the Partnership or Funding;
(the foregoing actions set forth in clauses (i) through (iv) being referred to
as "Restricted Payments"), except that the Partnership may apply up to 50% of
its Excess Available Cash to make a Restricted Payment if: at the time of such
Restricted Payment and after giving effect thereto, (A) no Default or Event of
Default shall have occurred and be continuing; (B) the Partnership's
Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding the Restricted Payment, taken as one period (after giving
pro forma effect to the Restricted Payment and (if applicable) the application
of the net proceeds therefrom and any events set forth in clauses (a)(ii) and
(a)(iii) under "--Limitation on Indebtedness" above) would have been at least
equal to 1.75 to 1; and (C) prior to making such Restricted Payment, Funding or
the Partnership shall have used an amount equal to such Restricted Payment to
purchase either Mortgage Notes or PIK Notes on the open market or pursuant to a
tender offer which purchase shall not be deemed to be a Restricted Payment.
Notwithstanding the foregoing, and so long as there is no Default or Event
of Default continuing, the foregoing provisions will not prohibit:
(i) payments made pursuant to the terms of the Services Agreement as
in effect on the date of the Senior Note Indenture;
(ii) distributions in respect of the Limited Partner Priority Capital
to the extent permitted under the Amended Partnership Agreement as in
effect on the date of the Senior Note Indenture;
(iii) payment of an annual bonus to Trump that has been approved by a
majority of the Noteholder Representatives;
(iv) dividend payments within 60 days after declaration if such
payments would comply with the foregoing provision;
(v) the repurchase, redemption or other acquisition or retirement of
any shares of any class of Capital Stock of Funding or Equity Interest of
the Partnership in exchange for (including any such exchange pursuant to
the exercise of a conversion right or privilege in connection with which
cash is paid in lieu of the issuance of fractional shares, interests or
scrip), or out of the Net Cash Proceeds of a substantially concurrent issue
and sale (other than to a Subsidiary) of, other shares of Capital Stock of
Funding or Equity Interests of the Partnership, as the case may be (other
than Redeemable Capital Stock or Redeemable Equity Interests, as the case
may be);
(vi) (I) the redemption, repayment, defeasance, repurchase or other
acquisition or retirement for value of any Subordinated Indebtedness or
Pari Passu Indebtedness of the Partnership (other than Redeemable Equity
Interests) in exchange for or out of the net cash proceeds of a
substantially concurrent issue and sale of (A) new Indebtedness of Funding
or (B) Equity Interests of the Partnership (other than Redeemable Equity
Interests) or Capital Stock of Funding (other than Redeemable Capital
Stock), provided that, with respect to clause (A), (1) the aggregate
principal amount of any such new Indebtedness does not exceed the aggregate
principal amount of such Subordinated or Pari Passu Indebtedness (or, if
such Subordinated or Pari Passu Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, then such lesser amount as of the date of
determination) plus accrued interest thereon plus the amount of any premium
or other payment required to be paid under the terms of the instrument
governing such Subordinated or Pari Passu Indebtedness or the amount of any
premium reasonably determined by the Partnership as necessary to accomplish
such refinancing by means of a tender offer or
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privately negotiated purchase and, in each case, actually paid, plus the
amount of expenses of the Partnership incurred in connection with such
refinancing, (2) if the Indebtedness so redeemed, repaid, defeased,
repurchased, acquired or retired is Subordinated Indebtedness, any such new
Indebtedness (x) has an Average Life to Stated Maturity that exceeds the
Average Life to Stated Maturity of the Senior Notes and a Stated Maturity
that is not earlier than the final Stated Maturity of the Senior Notes and
(y) is expressly subordinated in right of payment to the Senior Guarantee
at least to the same extent as the Subordinated Indebtedness to be
redeemed, repaid, defeased, repurchased, acquired or retired and (3) if the
Indebtedness so redeemed, repaid, defeased, repurchased, acquired or
retired is Pari Passu Indebtedness, any such new Indebtedness has an
Average Life to Stated Maturity that is not less than the Average Life to
Stated Maturity of such Indebtedness and a Stated Maturity that is not
earlier than the final Stated Maturity of such Indebtedness; or (II) the
redemption, repayment, defeasance, repurchase or other acquisition or
retirement for value of any Redeemable Equity Interests of the Partnership
through the issuance of new shares of Redeemable Equity Interests of the
Partnership, provided that any such new Redeemable Equity Interests (1) do
not have a maturity or are otherwise redeemable at the option of the holder
prior to the Stated Maturity of the Senior Notes and (2) are expressly
subordinated in right of payment to the Senior Guarantee at least to the
same extent as Redeemable Equity Interests to be redeemed, repurchased or
otherwise acquired or retired for value;
(vii) the redemption of any shares of any class of Capital Stock of
Funding, Equity Interest of the Partnership or any Indebtedness of the
Partnership or Funding, if (A) the holder thereof delivers an Opinion of
Counsel to the Senior Note Trustee that failure to so redeem would subject
the holder thereof to an adverse action by a Gaming Authority (or, if
applicable, a failure to act by a Gaming Authority that is adverse to the
holder) and (B) the Board of Partner Representatives determines (as
evidenced by a Board Resolution delivered to the Senior Note Trustee) that
such adverse action (or, if applicable, such failure to act) would be
likely to have a material adverse effect on such holder;
(viii) (A)(i) distributions or intercompany loans to Funding by the
Partnership to pay interest in cash on the outstanding Mortgage Notes in
accordance with the terms thereof and (ii) distributions or intercompany
loans to TCHI by the Partnership to pay interest in cash on the outstanding
TCHI Notes in accordance with the terms thereof, (B) distributions or
intercompany loans of up to 50% of the Partnership's Excess Available Cash
to Funding by the Partnership to purchase, redeem or otherwise acquire
Outstanding PIK Notes in accordance with the terms thereof, provided that
the Partnership's Consolidated Fixed Charge Coverage Ratio for the four
full fiscal quarters immediately preceding the Restricted Payment, taken as
one period (after giving pro forma effect to the Restricted Payment and (if
applicable) the application of the net proceeds therefrom and any events
set forth in clauses (a)(ii) and (a)(iii) under "--Limitation on
Indebtedness" above) would have been at least equal to 1.50 to 1, (C)
distributions or intercompany loans to Funding by the Partnership to pay
interest in cash on the Outstanding PIK Notes in accordance with the terms
thereof, provided that any events set forth in clause (a) under
"--Limitation on Indebtedness" above is at that time satisfied and (D)
distributions or intercompany loans to Funding or TCHI by the Partnership
to pay any tax liability of Funding resulting from any such distribution or
intercompany loan provided for in (A), (B) or (C) above;
(ix) distributions or intercompany loans by the Partnership pursuant
to the terms of the Partnership Agreement as in effect on the date of the
Senior Note Indenture (A) to pay reasonable general and administrative
expenses, including directors' fees and premiums for directors' and
officers' liability insurance of any corporate partner and (B) to make
indemnification payments as required by the Certificate of Incorporation of
Funding or TCHI or the Partnership Agreement each as in effect on the date
of the Senior Note Indenture and (C) to make distributions by the
Partnership, pursuant to the Partnership Agreement, to Partners in amounts
in respect of any tax year of the Partnership which do not exceed the
Partners' tax liability in respect of the Partnership's income for such
year computed as if the Partners were each taxpayers deriving items of
income, gain, loss or deduction only from the Partnership for such year and
by applying the sum of the higher of (x) the highest federal income tax
rate imposed on individuals for such year or (y) the highest federal income
tax rate imposed on corporations for such year, plus (z) in either case,
eight percent (8%) as the rate applicable to such year's results; and
(x) guarantees by the Partnership of Indebtedness of any special
purpose financing Affiliate of the Partnership if the incurrence of any
such guaranty is made in accordance with "--Limitation on
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Indebtedness" above and the net proceeds of any such Indebtedness are
provided to the Partnership. (Section 10.9)
Limitation on Partnership Leases. The Partnership will not, nor will any of
the Subsidiaries be permitted to, lease as tenant or subtenant real or personal
property (except Permitted Leases), unless the Partnership's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters immediately preceding
such event, taken as one period (and after giving pro forma effect to any such
lease as if such lease was entered into at the beginning of such four-quarter
period and any events set forth in clauses (a)(ii) and (a)(iii) under
"--Limitation on Indebtedness" above), would have been at least equal to a ratio
of 1.75 to 1.
In giving effect to the lease as of such four full fiscal quarters, it will
be assumed that the rent for such prior four fiscal quarters was the greater of
the (i) average rent over the term of such lease and (ii) rent payable for the
first four fiscal quarters. (Section 10.10)
Limitation on Preferred Stock of Subsidiaries and Subsidiary Distributions.
(a) The Partnership will not permit any of the Subsidiaries to, directly or
indirectly, issue or sell any Preferred Stock (except to the Partnership or a
Wholly-owned Subsidiary thereof).
(b) The Partnership will not permit any of the Subsidiaries to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on the
Capital Stock of such Subsidiary or to the holders of such Subsidiary's Capital
Stock (other than dividends or distributions payable in Capital Stock of such
Subsidiary) or (ii) purchase, redeem or otherwise acquire or retire for value
any such Capital Stock; provided that this covenant will not prevent the payment
by any Subsidiary of dividends or other distributions to the Partnership or a
Wholly-owned Subsidiary or the redemption or repurchase by any Subsidiary of any
of its Capital Stock owned by the Partnership or a Wholly-owned Subsidiary.
(Section 10.11)
Limitation on Payment Restrictions Affecting Subsidiaries. The Partnership
will not, nor will any of the Subsidiaries be permitted to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of the Partnership or such Subsidiary to
(a) pay dividends or make any other distributions on the Equity Interest of the
Partnership or the Capital Stock of such Subsidiary or pay any Indebtedness owed
to the Partnership or any other Subsidiary, (b) make any loans or advances to
the Partnership or any other Subsidiary or (c) transfer any of its property or
assets to the Partnership or any other Wholly-owned Subsidiary, except (i) any
restrictions, with respect to a Subsidiary that is not a Subsidiary on the date
of the Senior Note Indenture, in existence at the time such Person becomes a
Subsidiary of the Partnership (but not created in contemplation of such Person
becoming a Subsidiary), (ii) any restrictions with respect to a Subsidiary
imposed pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary, (iii) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the date of the Senior Note Indenture, and (iv) any
restrictions existing under any agreement which refinances or replaces the
agreements containing the restrictions in clauses (i), (ii) and (iii), provided
that the terms and conditions of any such agreement are no less favorable to
holders of the Senior Notes than those under or pursuant to the agreement
evidencing the Indebtedness refinanced. (Section 10.12)
Purchase of Senior Notes Upon Change of Control. If a Change of Control
shall occur at any time, then each holder of Senior Notes will have the right to
require that Funding or the Partnership repurchase such holder's Senior Notes in
whole or in part in integral multiples of $1,000 at a purchase price in cash in
an amount equal to 101% of the principal amount thereof, plus accrued and unpaid
interest (including any defaulted interest), if any, to the date of purchase,
pursuant to the Change of Control Offer described in the following paragraph and
the other procedures set forth in the Senior Note Indenture. Neither the Board
of Directors of Funding nor the Senior Note Trustee has the ability to waive
this Change of Control Offer requirement.
The definition of Change of Control (see "--Certain Definitions" below),
and the corresponding Change of Control Offer requirement, relate specifically
to the practical ability of Trump to control the activities of the Partnership.
A Change of Control may not occur if Funding recapitalizes or enters into a
transaction with management or any Affiliates, including Trump, subject to the
particular terms and conditions of any such recapitalization or transaction,
which are difficult to ascertain in advance. Accordingly, the provisions of the
Senior Note Indenture may not necessarily provide holders of Senior Notes with
protection in the form of a Change of Control Offer in the event of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving Funding that does not result in a Change of Control.
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Within 30 days following any Change of Control, Funding or the Partnership
will send by first-class mail, postage prepaid, to the Senior Note Trustee and
to each holder of the Senior Notes, a notice stating, among other things: the
purchase price; that the purchase date will be a business day no earlier than 45
days nor later than 60 days from the date of such notice; that any Senior Note
not tendered will continue to accrue interest; that, unless Funding or the
Partnership defaults in the payment of the purchase price, any Senior Notes
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control payment date; and certain other
procedures that a holder must follow to accept the Change of Control Offer or to
withdraw such acceptance.
Funding and the Partnership will not, and will not permit any Subsidiary
to, create or permit to exist or become effective any restriction (other than
restrictions existing under Indebtedness as in effect of the date of the Senior
Note Indenture) that would materially impair the ability of Funding or the
Partnership to make a Change of Control Offer to purchase the Senior Notes or,
if such Change of Control Offer is made, to pay for the Senior Notes tendered
for purchase. (Section 10.13)
Funding and the Partnership may not have adequate financial resources to
effect a Change of Control Offer. The inability of Funding or the Partnership to
repurchase Senior Notes upon a Change of Control would constitute an Event of
Default under the Senior Note Indenture.
Funding and the Partnership will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and other securities laws or
regulations in connection with a Change of Control Offer.
Limitations on Transactions with Affiliates. Neither Funding nor the
Partnership will, nor will any of the Subsidiaries be permitted to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of Funding or the
Partnership (other than a Wholly-owned Subsidiary) unless (a) such transaction
or series of related transactions is on terms that are no less favorable to
Funding, the Partnership or such Subsidiary, as the case may be, than would be
available at the time of such transaction or transactions in a comparable
transaction in arm's-length dealings with an unaffiliated third party and with
respect to a transaction or series of related transactions involving aggregate
payments equal to or greater than $5.0 million, such transaction or series of
related transactions is approved by a majority of the Noteholder
Representatives, and (b) Funding or the Partnership, as the case may be,
delivers an Officers' Certificate to the Senior Note Trustee certifying that
such transaction or transactions comply with clause (a) above. The foregoing
restriction will not apply to (1) operations under the Services Agreement as in
effect on the date of the Senior Note Indenture, (2) the payment of compensation
to the senior executive officers of the Partnership (excluding Trump) which has
been approved by a majority of the Noteholder Representatives, (3) the payment
of an annual bonus to Trump which has been approved by a majority of the
Noteholder Representatives, (4) the payment of director fees (other than to
Trump) not in excess of those in effect as of the date of the Senior Note
Indenture, (5) payments made pursuant to the Partnership Agreement as in effect
on the date of the Senior Note Indenture, (6) payments pursuant to the Senior
Partnership Note or with respect to any Subordinated Indebtedness, and (7)
payments permitted under "--Limitation on Restricted Payments" above. (Section
10.14)
Restriction on Transfer of Assets. The Partnership will not sell, convey,
transfer, lease or otherwise dispose of its assets or property to any of the
Subsidiaries. (Section 10.15)
Limitation on Activities and Investments. Neither the Partnership nor any
of the Subsidiaries will engage in any business or investment activities other
than those necessary or appropriate for, incident to, in connection with or
arising out of, developing, financing, owning and operating the Casino-Hotel.
The Partnership will not, and will not permit any Subsidiary to, make any
investment other than a Permitted Investment.
Funding will not conduct any business (including having any Subsidiary)
whatsoever, other than (i) to collect the amounts due and owing under the Senior
Partnership Note and any Subordinated Indebtedness, (ii) to preserve its rights
under the Senior Partnership Note, the Partnership Note and any Subordinated
Indebtedness and (iii) to do or cause to be done all things necessary or
appropriate to protect the property included in the Liens of the Senior Note
Mortgage and any further security and to preserve its rights therein and
otherwise to comply with its obligations under the Senior Notes, the Senior Note
Indenture, the PIK Notes, the PIK Note Indenture, the Mortgage Notes and the
Mortgage Note Indenture.
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Funding will not incur or otherwise become liable for any Indebtedness
(other than (i) the Senior Notes, (ii) the PIK Notes, including any PIK Notes
issued as payment of interest, (iii) the Mortgage Notes, (iv) any renewal,
extension, substitution, refunding, refinancing or replacement thereof in
accordance with the applicable indentures or (vi) any intercompany loan from the
Partnership), nor issue any Preferred Stock. (Section 10.16)
Restriction on Payment of Services Fee. Funding and the Partnership will
not, and will not permit the Subsidiaries to, pay any Services Fee under the
Services Agreement or to pay or reimburse any expenses relating thereto if a
Default or Event of Default has occurred and is continuing. The terms of the
Services Agreement cannot be amended to increase the amounts to be paid
thereunder in the aggregate or on any particular date, or in any other manner
which would be adverse to the Partnership, and the Partnership will not, and
will not permit the Subsidiaries to, enter into any management or consulting
agreement with any Affiliate relating to the Casino-Hotel other than the
Services Agreement. (Section 10.17)
Restriction on Amendment of the Mortgage Note Indenture and the PIK Note
Indenture. Without the consent of the holders of not less than a majority in the
aggregate principal amount of the then outstanding Senior Notes, Funding and the
Partnership shall not directly or indirectly effect (i) any amendment or
supplement to the Mortgage Note Indenture which causes or permits (a) any change
to the stated maturity date of the Mortgage Notes to before November 15, 2003 or
(b) any redemptions of the Mortgage Notes except as permitted in and on terms
included in the Mortgage Note Indenture as in effect on April 17, 1998; (ii) any
redemption of the Mortgage Notes except in connection with making a Restricted
Payment; or (iii) any amendment or supplement to the PIK Note Indenture which
causes or permits (a) any change to the stated maturity date of the PIK Notes to
before November 15, 2005 or (b) any redemptions of the PIK Notes except as
permitted in and on terms included in the PIK Note Indenture as in effect on
April 17, 1998. (Section 10.21)
Merger and Sale of Assets, etc.
The Partnership may not consolidate with, merge with or into any other
Person, sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets (as an entirety or substantially
as an entirety in one transaction or series of related transactions) to any
Person unless, among other things: (a) the Partnership shall be the continuing
Person, or the Person (if other than the Partnership) formed by such
consolidation or into which the Partnership is merged or the Person to which the
properties and assets of the Partnership are transferred (the "Surviving
Entity") shall be a corporation or partnership duly organized and validly
existing under the laws of the United States or any state thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
all of the obligations of the Partnership under the Senior Guarantee and the
performance and observance of the Senior Note Indenture and the Senior Note
Mortgage and the Senior Note Indenture and the Senior Note Mortgage shall remain
in full force and effect; (b) immediately before and immediately after giving
effect to such transaction, no Event of Default and no Default shall have
occurred and be continuing; (c) immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net Worth (as defined) of the
Surviving Entity is at least equal to the Consolidated Net Worth of the
Partnership immediately prior to such transaction or series of transactions; (d)
immediately before and immediately after giving effect to such transaction on a
pro forma basis, the Partnership or the Surviving Entity, as the case may be,
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "--Limitation on Indebtedness"; and (e)
immediately after such transaction, the Partnership or the Surviving Entity
holds all Permits required for operation of the Casino-Hotel.
Funding may not consolidate with, merge with or into any other Person, or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets (as an entirety in one transaction
or series of related transactions) to any Person unless, among other things: (a)
Funding shall be the continuing Person, or the Person (if other than Funding)
formed by such consolidation or into which Funding is merged or to which the
properties and assets of Funding are transferred shall be a corporation,
partnership or trust duly organized and validly existing under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, all of the obligations of Funding
under the Senior Notes, the Senior Note Indenture and the Senior Note Mortgage;
(b) immediately before and immediately after giving effect to such transaction
on a pro forma basis, no Event of Default and no Default shall have occurred and
be continuing; (c) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of Funding, or the Person (if other than
Funding) is at least equal to the Consolidated Net Worth of Funding immediately
prior to
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such transaction or series of transactions; (d) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
Partnership, could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness); (e) the Partnership shall have by supplemental
indenture confirmed that its obligations under the Senior Guarantee and the
Senior Note Mortgage shall apply to such Person's obligations under the Senior
Note Indenture and the Senior Notes; and (f) immediately after such transaction,
Funding or the entity formed by such merger or consolidation or to whom all or
substantially all of the assets of Funding are transferred holds all Permits
required for the operation of the business of Funding.
Funding shall also deliver to the Senior Note Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (a) such consolidation,
merger, sale, assignment, conveyance, transfer, lease or disposition and such
supplemental indenture comply with the Senior Note Indenture and (b) the
transaction shall not impair the Senior Note Indenture or the Lien of the Senior
Note Mortgage, the Senior Note Indenture and the Senior Notes and the rights and
powers of the Senior Note Trustee and holders of the Senior Notes thereunder.
(Section 8.1)
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which Funding or the Partnership is not the continuing Person, the successor
Person formed or remaining shall succeed to, and be substituted for, and may
exercise every right and power of, Funding or the Partnership, as the case may
be, and Funding or the Partnership, as the case may be, would be discharged from
all obligations and covenants under the Senior Note Indenture, the Senior Notes
and the Senior Mortgage Documents. (Section 8.2)
Events of Default
The following events are defined in the Senior Note Indenture as "Events of
Default":
(a) default in the payment of any interest on any of the Senior Notes when
such interest becomes due and payable and continuance of such default for a
period of 30 days;
(b) default in the payment of the principal of (or premium, if any, on) any
of the Senior Notes when the same becomes due and payable at its Stated
Maturity, upon acceleration, optional redemption, required repurchase, scheduled
principal payment or otherwise;
(c) (i) default in the performance, or breach, of any covenant of Funding
or the Partnership under the Senior Notes, the Senior Note Indenture or the
Senior Guarantee (other than a default or breach that is specifically dealt with
elsewhere in these provisions) that continues for 30 days after written notice
has been given (x) to Funding by the Senior Note Trustee or (y) to Funding and
the Senior Note Trustee by holders of at least 25% of the aggregate principal
amount of the Outstanding Senior Notes; (ii) default in the performance or
breach of the provisions of "Merger and Sale of Assets, etc."; (iii) Funding or
the Partnership shall have failed to make or consummate a Change of Control
Offer in accordance with provisions of "--Certain Covenants--Purchase of Senior
Notes Upon Change of Control"; or (iv) Funding or the Partnership shall have
failed to make or consummate a required purchase of Mortgage Notes or PIK Notes
in accordance with the provisions of "--Certain Covenants--Limitation on
Restricted Payments";
(d) (i) so long as there are only Registrable Series A Senior Notes
outstanding, default by the Partnership, Funding or any Subsidiaries in the
payment, when due (whether at maturity, required payment, acceleration, demand
or otherwise) of any Indebtedness in an aggregate principal amount in excess of
$10 million or any interest or premium thereon and such failure continues after
the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness or any such Indebtedness is declared to be due and
payable or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; and (ii) on and after the date
on which (A) a registration statement with respect to the Series A Senior Notes
has been declared effective under the Securities Act and such Series A Senior
Notes have been disposed of in accordance with such registration statement, (B)
the Series A Senior Notes are distributed to the public pursuant to Rule 144
promulgated under the Securities Act or (C) the Series A Senior Notes have been
otherwise transferred and new certificates for them not bearing a legend
restricting further transfer have been delivered by Funding, the Partnership,
Funding or any of the Subsidiaries fail to perform any term, covenant or
agreement to be performed or observed under any agreement or instrument
evidencing or securing or relating to any Indebtedness in an aggregate principal
amount in excess of $10 million, if the effect of such failure is to accelerate
the maturity of such Indebtedness;
(e) one or more judgments, orders or decrees for the payment of money in
excess of $10 million, either individually or in the aggregate, shall be
rendered against Funding, the Partnership or any Subsidiaries or any of
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their respective properties and shall not be discharged and either (i) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment, order or decree or (ii) there shall be any period of 60 days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(f) an "Event of Default" under any Indebtedness secured by a Lien on any
of the property or assets of Funding or any of the Subsidiaries having a book
value in excess of $500,000, which Lien is senior to the Lien on such property
or assets which secures the Senior Notes;
(g) there shall have been the entry by a court having jurisdiction in the
premises of (i) a decree or order for relief in respect of Funding, the
Partnership or any of the Subsidiaries in an involuntary case or proceeding
under any applicable Bankruptcy Law or (ii) a decree or order adjudging Funding,
the Partnership or any of the Subsidiaries bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
Funding, the Partnership or any of the Subsidiaries under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of Funding, the Partnership or
any of the Subsidiaries or of any substantial part of their property, or
ordering the winding-up or liquidation of their affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days;
(h) (i) Funding, the Partnership or any of the Subsidiaries commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any other
case or proceeding to be adjudicated bankrupt or insolvent, or (ii) Funding, or
any of the Subsidiaries consents to the entry of a decree or order for relief in
respect of Funding, the Partnership or such Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or (iii) Funding, the
Partnership or any of the Subsidiaries files a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law, or
Funding, the Partnership or any of the Subsidiaries consents to (1) the filing
of such petition or the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
Funding, the Partnership or such Subsidiary or of any substantial part of its
property, (2) the making by it of an assignment for the benefit of creditors or
(3) the admission by it in writing of its inability to pay its debts generally
as they become due or (iv) the taking of corporate or partnership action by
Funding, the Partnership or any of the Subsidiaries in furtherance of any such
action in this paragraph (h);
(i) the revocation, suspension or involuntary loss of any Permit which
results in the cessation of a substantial portion of the operations of the
Casino-Hotel for a period of more than 90 consecutive days;
(j) the Senior Guarantee, the Senior Guarantee Mortgage, or Senior Note
Mortgage shall for any reason cease to be in full force and effect or
enforceable in accordance with its terms;
(k) an "Event of Default" under the Senior Note Mortgage the TCHI Note
Indenture, the TCHI Note Mortgage Documents, the Mortgage Note Indenture or the
PIK Note Indenture shall have occurred and be continuing; and
(l) an entity, which at the time, directly or indirectly, holds general
partnership interests in both of Trump Plaza Associates and Trump Taj Mahal
Associates, which general partnership interests had previously been held by
Trump and his Affiliates, sells through an initial public distribution its
equity securities without having first acquired all the direct and indirect
general partnership interests in the Partnership held by Trump as of the date of
the Senior Note Indenture. (Section 5.1)
If an Event of Default (other than an Event of Default described in clause
(g) or (h) above) occurs and is continuing, the Senior Note Trustee or the
holders of not less than 25% in principal amount of Outstanding Senior Notes, by
notice in writing to Funding (and to the Senior Note Trustee, if given by such
holders), may, and the Senior Note Trustee at the request of such holders shall,
declare all principal of, premium, if any, and interest on the Senior Notes to
be due and payable and thereupon the Senior Note Trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of the Senior Notes by
appropriate judicial proceeding. If an Event of Default described in clause (h)
or (i) above occurs, the principal of all the Senior Notes shall ipso facto
become and be due and payable immediately without any declaration or other act
on the part of the Senior Note Trustee or any holder of the Senior Notes.
(Section 5.2)
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Senior Note Trustee, the
holders of a majority in aggregate principal amount of Senior Notes
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outstanding, by written notice to Funding and the Senior Note Trustee, may annul
such declaration if (a) Funding has paid or deposited with the Senior Note
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Senior Note
Trustee under the Senior Note Indenture and the reasonable compensation,
expenses, disbursements and advances of the Senior Note Trustee, its agents and
counsel, (ii) all overdue interest on all Senior Notes, (iii) the principal of
and premium, if any, on any Senior Notes which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate borne by the
Senior Notes, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Senior Notes; and (b)
all Events of Default, other than the nonpayment of principal of the Senior
Notes which have become due solely by such declaration of acceleration, have
been cured or waived. (Section 5.2)
The holders of not less than a majority in principal amount of the Senior
Notes outstanding may on behalf of the holders of the Senior Notes waive any
past Defaults under the Senior Note Indenture, except a Default in the payment
of the principal of, premium, if any, or interest on any Senior Note, or in
respect of a covenant or provision which under the Senior Note Indenture cannot
be modified or amended without the consent of the holder of each Outstanding
Senior Note affected. (Section 5.13)
Funding is required to furnish to the Senior Note Trustee, within 120 days
after the close of each fiscal year, an Officer's Certificate stating whether,
after a review of the activities of Funding and its performance under the Senior
Note Indenture has been made, there has been any default during such fiscal year
and, if so, specifying such default and the nature and status thereof. If
Funding obtains knowledge of a default under the Senior Note Indenture, it is
required promptly to notify the Senior Note Trustee of such default. (Section
10.19).
The Senior Note Indenture provides that the Senior Note Trustee, within 30
days after the occurrence of a Default, shall give notice thereof by mail to all
holders of the Senior Notes, unless the Default has been cured or waived;
provided, however, except in the case of a Default in the payment of principal
of or interest on the Senior Notes, the Senior Note Trustee may withhold such
notice of such default if a trust committee of Responsible Officers of the
Senior Note Trustee in good faith determines that such withholding is in the
interest of the holders of Senior Notes. (Section 6.1)
Defeasance or Covenant Defeasance of Senior Note Indenture
(a) Funding and the Partnership may, at their option and at any time upon
compliance with the conditions set forth in the Senior Note Indenture, elect to
have the obligations of Funding discharged with respect to the outstanding
Senior Notes ("defeasance"). Such defeasance means that Funding and the
Partnership shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Senior Notes, except for (i) the rights of
holders of outstanding Senior Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Senior Notes when such
payments are due, (ii) Funding's obligations with respect to the Senior Notes
concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Senior Note
Trustee and (iv) the defeasance provisions of the Senior Note Indenture. In
addition, Funding and the Partnership may, at their option and at any time,
elect to have the obligations of Funding and the Partnership released with
respect to certain covenants that are described in the Senior Note Indenture
("covenant defeasance") and any omission to comply with such obligations will
not constitute a Default or an Event of Default with respect to the Senior
Notes. In the event covenant defeasance occurs, certain events (not including
nonpayment, bankruptcy and insolvency events) described under "Events of
Defaults" will no longer constitute an Event of Default with respect to the
Senior Notes. (Sections 4.1, 4.2 and 4.3)
(b) In order to exercise either defeasance or covenant defeasance, among
other things, (i) Funding or the Partnership must irrevocably deposit with the
Senior Note Trustee, in trust, for the benefit of the holders of the Senior
Notes, cash in United States dollars, U.S. Government Obligations (as defined in
the Senior Note Indenture), or a combination thereof, in such amounts as will be
sufficient, to pay the principal of, premium, if any, and interest on the
outstanding Senior Notes on the Stated Maturity of such principal or installment
of principal or interest and any mandatory payments applicable to the
outstanding Senior Notes; (ii) Funding or the Partnership must deliver to the
Senior Note Trustee an Opinion of Counsel stating that the holders of the
outstanding Senior Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same time
as would have been the case if such defeasance had not occurred; (iii) such
defeasance or covenant defeasance must not cause the
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Senior Note Trustee for the Senior Notes to have a conflicting interest with
respect to any securities of Funding; (iv) such defeasance or covenant
defeasance must not result in a breach or violation of, or constitute a Default
or Event of Default under the Senior Note Indenture or any other material
agreement or instrument to which Funding or the Partnership is a party or by
which it is bound; (v) Funding or the Partnership must deliver to the Senior
Note Trustee an Officers' Certificate stating that the deposit was not made by
Funding or the Partnership with the intent of defeating, hindering, delaying or
defrauding creditors of Funding or the Partnership or others and (vi) Funding or
the Partnership must deliver to the Senior Note Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for relating to either the defeasance or the covenant defeasance, as the case
may be, have been complied with. (Section 4.4)
If the funds deposited with the Senior Note Trustee to effect the
defeasance or covenant defeasance are insufficient to pay the principal of,
premium, if any and interest on the Senior Notes when due, then the obligations
of Funding under the Senior Note Indenture will be revived, and no such
defeasance or covenant defeasance will be deemed to have occurred.
Satisfaction and Discharge
The Senior Note Indenture and all Senior Mortgage Documents will cease to
be of further effect (except as to surviving rights of registration of transfer
or exchange of the Senior Notes) as to all outstanding Senior Notes when (a)
either (i) all the Senior Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Senior Notes which have been replaced or paid) have
been delivered to the Senior Note Trustee for cancellation or (ii) all Senior
Notes not theretofore delivered to the Senior Note Trustee for cancellation (x)
have become due and payable, (y) will become due and payable at their stated
maturity within one year or (z) are to be called for redemption within one year,
and Funding or the Partnership in the case of (ii)(x), (y) or (z) above, has
irrevocably deposited or caused to be deposited with the Senior Note Trustee
funds in an amount sufficient to pay and discharge the entire indebtedness on
the Senior Notes not theretofore delivered to the Senior Note Trustee for
cancellation, for principal of, premium, if any, and interest to the date of
payment; (b) Funding or the Partnership has paid all other sums payable under
the Senior Note Indenture by Funding and the Partnership; and (c) Funding and
the Partnership have delivered to the Senior Note Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent under the Senior Note Indenture relating to the satisfaction and
discharge of the Senior Note Indenture have been complied with and that such
satisfaction and discharge will not result in a breach or violation of or
constitute a default under the Senior Note Indenture or any other material
agreement or instrument to which the Partnership or Funding is a party or by
which either Funding or the Partnership is bound. (Section 13.1)
Modifications and Amendments
From time to time, the parties to the Senior Note Indenture, without the
consent of the holders of the Senior Notes, may enter into one or more
supplemental indentures for certain specified purposes, including, among other
things, curing ambiguities or inconsistencies, provided the provisions do not
adversely affect the rights of any holders, adding covenants or successor
parties, and complying with regulatory or statutory requirements. (Section 9.1).
Modifications, changes and amendments to the Senior Note Indenture or any
Senior Mortgage Document also may be made by the parties thereto with the
consent of the holders of not less than a majority of the principal amount of
the Outstanding Senior Notes; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Senior Note
affected thereby: (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Senior Note or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any Senior Note or
any premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity thereof;
(ii) modify the obligation of Funding or the Partnership to make and consummate
a Change of Control Offer (or modify any of the provisions or definitions with
respect thereto in a manner which adversely affects the rights of the holders of
Senior Notes); (iii) reduce the percentage in principal amount of outstanding
Senior Notes, the consent of whose holders is required for any such supplemental
indenture or the consent of whose holders is required for any waiver; (iv)
modify any of the provisions regarding modifications and amendments or the
percentage of the Senior Note Indenture required for any waiver, except to
increase any such percentage or to provide that certain other provisions of the
Senior Note Indenture cannot be modified or waived without the consent of the
holder of each Senior Note affected thereby; or
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(v) except as otherwise permitted under "--Merger and Sale of Assets, etc.,"
consent to the assignment or transfer by Funding or the Partnership of any of
its rights and obligations under the Senior Note Indenture. (Section 9.2)
The holders of a majority of the principal amount of the Outstanding Senior
Notes may waive compliance with certain restrictive covenants and provisions of
the Senior Note Indenture. (Section 10.20)
Gaming Laws
In certain circumstances holders of Senior Notes may be required to qualify
under the Casino Control Act as financial sources of the Partnership and as
holders of securities of Funding. See "Business--Gaming and Other Laws and
Regulations." The Senior Note Indenture provides that if the CCC requires that a
holder of Senior Notes (whether the record or beneficial owner) qualify under
the Casino Control Act and if such holder does not so qualify, then such holder
must dispose of his interest in the Senior Notes within 30 days after Funding's
receipt of notice of such finding, or within such earlier time as the CCC may
require, or Funding or the Partnership may redeem such Senior Notes. Any such
redemption by Funding shall be at the lower of (i) the Outstanding Amount (as
defined) and (ii) the Fair Market Value (as defined) of such Senior Notes.
(Section 11.9) If any holder of Senior Notes is found unqualified by the CCC, it
is unlawful for such holder (i) to exercise, directly or through any trustee or
nominee, any right conferred by the Senior Notes, or (ii) to receive any
interest upon the Senior Notes or any remuneration in any form from any
Regulated Company (including the Partnership, Funding or the Senior Note
Trustee) for services rendered or otherwise.
The Senior Note Indenture further requires the Senior Note Trustee to
report the names of all record holders of the Senior Notes to the Director of
the Division and to the CCC promptly after the initial issuance of the Senior
Notes and at stated intervals thereafter. The Senior Note Indenture also
requires the Senior Note Trustee to provide to the Director of the Division and
the CCC copies of all written communications from the Senior Note Trustee to the
holders of the Senior Notes, notice of any default under the Senior Note
Indenture, certain other information concerning the Senior Note Trustee's
enforcement of rights under the Senior Note Indenture, and other matters
respecting the security for the Senior Notes.
(Section 7.3)
Enforcement of the Senior Notes and the guarantees may be limited by the
Casino Control Act to the extent that, in the event of default and disclosure,
the holders of the Senior Notes seek, through foreclosure, ownership and control
of the Partnership. Prior to obtaining control of the Partnership, the holders
of the Senior Notes must obtain interim authorization for the operation of a
casino from the CCC.
The Purchase Agreement
Termination of Certain Rights. Pursuant to the terms of the Note Purchase
Agreement dated April 17, 1998 among Funding, TCHI, the Partnership and the
funds listed therein (the "Purchase Agreement"), the holders of Privately
Outstanding Notes (as defined) are entitled to certain rights (the "Purchase
Agreement Rights") above and beyond those set forth in the Senior Note
Indenture. For purposes of the Exchange Offer, "Privately Outstanding Notes" is
defined in the Purchase Agreement and refers to the Senior Notes upon the
original issuance thereof and at all times subsequent thereto until, in the case
of any Senior Note, (i) the Exchange Offer has been consummated and such Senior
Note has been resold by the Senior Note Purchaser, (ii) the sale or other public
distribution of such Senior Note has been registered pursuant to the Securities
Act and such Senior Note has been disposed of by the Senior Note Purchaser in
accordance with such registration, or (iii) such Senior Note has been resold by
the Senior Note Purchaser pursuant to Rule 144, Rule 144A or other resale
exemption from the registration requirements of the Securities Act. A subsequent
purchaser of Series B Senior Notes will not be entitled to the Purchase
Agreement Rights, which include: (i) the right to require Funding to pay the
delivery expenses in the event of the surrender of a Senior Note for
substitution, replacement, or exchange, (ii) the right to require Funding to pay
all stamp, transfer, and other similar taxes and governmental fees in connection
with the issuance, transfer or exchange, including exchange pursuant to the
Exchange Offer, of the Series A Senior Notes, (iii) the right to direct the
Senior Note Trustee to forward the interest payment on the Senior Notes directly
to the account of the holder of the Senior Notes, (iv) the right to inspect the
Partnership's facilities upon reasonable notice, (v) the obligation of Funding
and the Partnership to provide to the holders of the Senior Notes certain
financial information and certificates, (vi) the obligation of Funding to report
directly to the holders of the Senior Notes the occurrence of certain events
under ERISA, and (vii) the waiver of the obligation that a holder of Senior
Notes must post a bond in connection with the issuance of a replacement Senior
Note in exchange for a lost, destroyed, or wrongfully taken Senior Note.
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The Senior Note Mortgage and the Senior Guarantee Mortgage
General. The Senior Partnership Note is secured by the Senior Note
Mortgage, which has been assigned to the Senior Note Trustee for the benefit of
the holders of the Senior Notes. Performance under the Senior Guarantee is
secured by the Senior Guarantee Mortgage, which has been made directly to the
Senior Note Trustee for the benefit of the holders of the Senior Notes. The
Senior Note Mortgage and the Senior Guarantee Mortgage encumber Trump Marina and
the fee and leasehold interests of the Partnership in the land on which Trump
Marina and its ancillary facilities (including the Marina) are located, all
other facilities owned by or leased to the Partnership, substantially all
additions and improvements constructed thereon and (except, in certain
circumstances, as permitted by the Senior Note Mortgage where such property is
financed) the interest of the Partnership in substantially all furniture,
furnishings, fixtures, machinery and equipment at any time forming a part
thereof, or used in connection therewith and substantially all of the other
assets of the Partnership. Since Funding's right as mortgagee under the Senior
Note Mortgage is assigned to the Senior Note Trustee pursuant to an instrument
of assignment, all references in the Senior Note Mortgage to "Mortgagee" are
referred to herein as the Senior Note Trustee. The Partnership has the right to
release from the Lien of the Senior Mortgage Documents certain tangible personal
property which has become obsolete or unfit for use or which is no longer
necessary in the conduct of its business or the operation of the Collateral.
Events of Default under the Senior Note Mortgage. The following events are
defined in the Senior Note Mortgage as "Events of Default":
(a) default in the payment of any interest on the Senior Partnership
Note when such interest becomes due and payable and default continues for a
period of 30 days;
(b) default in the payment of all or a portion of the principal of (or
premium, if any, on) the Senior Partnership Note when the same becomes due
and payable at its Maturity;
(c) default in the payment of any other sum due under the Senior
Partnership Note or under the Senior Note Mortgage, and the continuance of
such default for a period of 30 days after there has been given to the
Partnership a notice specifying such default and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Senior Note Mortgage;
(d) default in the performance, or breach, of any covenant of the
Partnership in the Senior Note Mortgage (other than a covenant, a default
in the performance or breach of which is elsewhere in the Senior Note
Mortgage specifically dealt with), and continuance of such default or
breach for a period of 30 days after there has been given to the
Partnership a notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of Default" under the
Senior Note Mortgage, unless (i) the default or breach is of such a nature
that is curable but not susceptible of being cured with due diligence
within such 30-day period (for reasons other than the lack of funds), (ii)
the Partnership delivers an Officers' Certificate to the Senior Note
Trustee within such 30-day period stating (A) the applicability of the
provisions of clause (i) to such default or breach, (B) the Partnership's
intention to remedy such default or breach with reasonable diligence and
(C) the steps which the Partnership has undertaken or intends to undertake
to remedy such default or breach and (iii) the Partnership delivers to the
Senior Note Trustee additional Officers' Certificates every 30 days
thereafter updating the information contained in the certificate described
in clause (ii), in which case such 30-day period shall be extended for such
further period of time (but in no event more than 60 days after the last
day of such 30-day period) as may reasonably be required to cure the same,
provided that the Partnership is then proceeding and thereafter continues
to proceed to cure the same with reasonable diligence;
(e) an "Event of Default" as defined in the Senior Note Indenture,
shall occur and be continuing;
(f) default in the performance, or breach, of any of the provisions
governing consolidation and mergers in the Senior Note Mortgage;
(g) if any representation or warranty of the Partnership set forth in
the Senior Note Mortgage or in any notice, certificate, demand or request
delivered to the Senior Note Trustee pursuant to the Senior Note Mortgage
shall prove to be incorrect in any material respect as of the time when
made; or
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(h) default by the Partnership, Funding or any of the Subsidiaries
under any Indenture, whether such Indebtedness now exists or shall
hereafter be created, if such default would permit the holders of such
Indebtedness to cause, or has resulted in, acceleration of the maturity of
such Indebtedness, in an aggregate principal amount in excess of
$5,000,000.
Events of Default under the Senior Guarantee Mortgage. Under the Senior
Guarantee Mortgage, "Events of Default" include all of the events defined above
as "Events of Default" under the Senior Note Mortgage (but substituting the
Senior Guarantee Mortgage for all references therein to the Senior Note Mortgage
and adding a default under the Senior Notes to the defaults described in clauses
(a), (b) and (c) above) and, in addition (i) default in the payment or
performance of any obligation of the Partnership under the Senior Guarantee at
the time such payment or performance is required under the Senior Note Indenture
and (ii) the occurrence of an "Event of Default," as defined in the Senior Note
Mortgage. (Section 3.1 of the Senior Guarantee Mortgage)
The Senior Note Trustee
The Senior Note Trustee is U.S. Bank National Association, a national
banking association, which also serves as the TCHI Note Trustee, the PIK Note
Trustee and the Mortgage Note Trustee.
The Senior Note Indenture provides that, except during the continuance of
an Event of Default, the Senior Note Trustee will perform only such duties as
are specifically set forth in the Senior Note Indenture, the Senior Note
Mortgage and the Senior Guarantee Mortgage. During the existence of an Event of
Default, the Senior Note Trustee will exercise such of the rights and powers
vested in it under the Senior Note Indenture. (Section 5.3) Subject to the
provisions of Section 315 of the Trust Indenture Act, the Senior Note Trustee
will be under no obligation to exercise any of its rights or powers under the
Senior Note Indenture at the request of any of the holders, unless they shall
have offered to the Senior Note Trustee security or indemnity against the costs
and expenses which might be incurred in compliance with such request. (Section
6.2) The holders of a majority in principal amount of Outstanding Senior Notes
shall have the right to direct the time, method, and place of conducting any
proceeding for exercising any remedy available to the Senior Note Trustee
subject to certain conditions. (Section 5.12)
The Senior Note Indenture and provisions of the Trust Indenture Act
incorporated by reference therein contain limitations on the rights of the
Senior Note Trustee, should it become a creditor of Funding, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claims as security or otherwise. Except under certain
limited circumstances set forth in the Trust Indenture Act, if the Senior Note
Trustee becomes a creditor of Funding or the Partnership, then the Senior Note
Trustee will be deemed to have a conflicting interest and must, within 90 days,
eliminate such conflicting interest or take prompt steps to have a successor
trustee appointed. The Senior Note Trustee will be permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined) it must eliminate such conflict or resign. (Article 6)
Usury Law
Funding and the Partnership have agreed not to claim voluntarily the
benefit of any usury law against the holders of the Senior Notes. (Section 5.15)
Registration Rights
On April 17, 1998, Funding, the Partnership, TCHI and the initial
purchasers of the Senior Notes and the TCHI Notes entered into the Registration
Rights Agreement. A copy of the Registration Rights Agreement is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Pursuant to the terms of the Registration Rights Agreement, Funding and the
Partnership, with respect to the Series A Senior Notes, agreed to (i) cause to
be filed, on or prior to July 17, 1998, a registration statement with the SEC
under the Securities Act covering the Exchange Offer and (ii) use their
reasonable best efforts to cause (A) such registration statement to be declared
effective on or prior to September 21, 1998 and (B) Series B Senior Notes to be
delivered to the Depositary for delivery to all holders who have tendered
Registrable Series A Senior Notes pursuant to the Exchange Offer.
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The Registration Rights Agreement provides that, upon the occurrence of
certain events preventing the consummation of the Exchange Offer, in lieu
thereof, Funding and the Partnership will file a shelf registration statement
with the SEC and use their best efforts to cause such registration statement to
be effective for a period of 24 months. Funding and the Partnership are also
required to file additional registration statements upon the conclusion of the
24 month period, upon the request of the holders of a majority of the
outstanding principal amount of Senior Notes.
Liquidated Damages. The Registration Rights Agreement and the Senior Note
Indenture provide that if (i) Funding and the Partnership fail to file a
registration statement with respect to the Exchange Offer (or the shelf
registration statement) by July 17, 1998, or such registration statement has not
been declared effective by September 21, 1998, (ii) the Exchange Offer has not
been consummated on or prior to October 19, 1998, (iii) a stop order has been
issued with respect to any shelf registration statement, or (iv) Funding or the
Partnership provides the holders of the Senior Notes with a notice of the
occurrence of any event which causes there to be a material misstatement or
omission in the prospectus for the Senior Notes (each an "Event Date"), then the
Partnership and Funding will pay to each holder of Series A Senior Notes, as
liquidated damages, an additional amount equal to $0.05 per week per $1,000
principal amount of the applicable Series A Senior Notes held by such holder.
Beginning the 61st day following the Event Date, the weekly liquidated damages
amount will be increased by an additional $0.05 per week per $1,000 principal
amount. Such liquidated damages will cease to accrue (a) with respect to an
Event Date of the type specified in clause (i), upon the filing or effectiveness
of the registration statement, (b) with respect to an Event Date of the type
specified in clause (ii), upon the consummation of the Exchange Offer, (c) with
respect to an Event Date of the type specified in clause (iii), when the
registration statement is no longer subject to such order and (d) with respect
to an Event Date of the type specified in clause (iv), when such notice is
longer applicable.
Intercreditor Agreement
In connection with the Initial Offering and the related refinancing, the
Partnership entered into an Intercreditor Agreement with the Senior Note
Trustee, the TCHI Note Trustee, the Mortgage Note Trustee and the PIK Note
Trustee pursuant to which the Partnership agreed not to make any payments with
respect to the Mortgage Notes and the PIK Notes, and the Mortgage Note Trustee
and the PIK Note Trustee have each been prohibited from realizing on the
collateral with respect to the Mortgage Notes and the PIK Notes, for so long as
there exists any payment default on the Senior Notes or the TCHI Notes. As of
April 30, 1998, there is an aggregate principal amount of $62.0 million in
Senior Notes outstanding and an aggregate principal amount of $5.0 million in
TCHI Notes outstanding.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Adjusted Consolidated Interest Expense" means, without duplication, for
any period, the sum of (a) the interest expense of the Partnership and its
Consolidated Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net cost under
interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation and (iv) accrued interest
plus (b) the interest component of the Capital Lease Obligations paid, accrued
and/or scheduled to be paid, or accrued by the Partnership and its Consolidated
Subsidiaries during such period, in each case as determined in accordance with
GAAP consistently applied.
"Adjusted Consolidated Net Income (Loss)" means, for any period, the
Consolidated net income (or loss) of the Partnership and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP consistently
applied, adjusted, to the extent included in calculating such net income (loss),
by excluding (a) all extraordinary gains or losses (less all fees and expenses
relating thereto), (b) the portion of net income (or loss) of the Partnership
and its Consolidated Subsidiaries allocable to minority interests in
unconsolidated Persons to the
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extent that cash dividends or distributions have not actually been received by
the Partnership or one of its Consolidated Subsidiaries, (c) net income (or
loss) of any Person combined with the Partnership or any of the Subsidiaries on
a "pooling of interests" basis attributable to any period prior to the date of
combination, (d) any gain or loss, net of taxes, realized upon the termination
of any employee pension benefit plan, (e) net gains or losses (less all fees and
expenses relating thereto) in respect of dispositions of assets other than in
the ordinary course of business, or (f) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its shareholders.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 5% or more of such Person's Capital Stock or
Equity Interest or any officer or director of any such Person or other Person or
with respect to any natural Person, any person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (ii) the amount of each such principal payment by (b)
the sum of all such principal payments.
"Cage Cash" means the sum of $5,000,000 retained for daily operations of
Trump Marina.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Casino-Hotel" means the casino and hotel complex currently known as the
"Trump Marina Hotel Casino" in Atlantic City, New Jersey and ancillary
structures, marina and other facilities and all furniture, fixtures and
equipment at any time contained therein, in each case owned by or leased to the
Partnership and covered by the lien of the Senior Note Mortgage.
"Casualty" means any act or occurrence of any kind or nature which results
in damage, loss or destruction to any buildings or improvements on the Premises
and/or Tangible Personal Property (as such terms are defined in the Senior Note
Mortgage).
"CCC" means the New Jersey Casino Control Commission or any successor
entity thereto.
"Change of Control" means an event as a result of which (a) the Permitted
Holder does not have the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the Board of Directors of TCHI
and the Board of Partner Representatives of the Partnership or to control the
management of the Partnership; or (b) the Partnership is liquidated or dissolved
or adopts a plan of liquidation or dissolution; provided, however, a Change of
Control shall not be deemed to occur as a result of one or more Public Offerings
so long as both (i) the Permitted Holder continues to beneficially own 20% or
more of the entity which conducted the Public Offering and (ii) no other holder
beneficially owns a greater percentage of the voting securities of such entity
than the Permitted Holder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, all of the property and assets that are
from time to time subject to the Lien of the Senior Note Mortgage.
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"Consolidated Fixed Charge Coverage Ratio" means for any period the ratio
of (a) the sum of Adjusted Consolidated Net Income, Adjusted Consolidated
Interest Expense and Consolidated Income Tax Expense, plus, without duplication,
all depreciation, amortization and all other non-cash charges (excluding any
such non-cash charges constituting an extraordinary item of loss or any non-cash
charge which requires an accrual of or a reserve for cash charges for any future
period) in each case, for such period, of the Partnership and its Consolidated
Subsidiaries on a Consolidated basis, all determined in accordance with GAAP
consistently applied, to (b) Adjusted Consolidated Interest Expense for such
period.
"Consolidated Income Tax Expense" means for any period the provision for
federal, state, local and foreign income taxes of the Partnership and its
Consolidated Subsidiaries for such period as determined in accordance with GAAP
consistently applied.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP consistently
applied. The term "Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Senior Note Trustee, or
its agent, at which at any particular time its corporate trust business shall be
administered.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) of such Person in equity.
"Excess Available Cash" shall be calculated semi-annually on June 30 and
December 31 and means the sum of the Partnership's cash and cash equivalents as
shown on its balance sheet at such date less the sum of (1) the Partnership's
Cage Cash, (2) the Partnership's working capital reserve of $10 million less the
amount, if any, available to the Partnership under the Working Capital Facility,
(3) the aggregate amount required to meet the cash interest payments due on all
Permitted Indebtedness on the respective next interest payment dates and the
sinking fund payment on the Senior Notes during the succeeding six month period,
(4) distributions to be made during the succeeding six month period in respect
of taxes as contemplated by clause (c) of Section 10.9(b)(ix) of the Senior Note
Indenture and (5) the cash amounts required to meet the Partnership's Capital
Expenditures (as defined in the Partnership Agreement), CRDA bond payments and
other fixed charges projected during the succeeding six month period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"F,F&E Financing Agreement" means an agreement which creates a Lien upon
any after-acquired Tangible Personal Property (as defined in the Senior Note
Mortgage) and/or other items constituting Operating Assets (as defined in the
Senior Note Mortgage), which are financed, purchased or leased by the
Partnership.
"Gaming Authority" means the CCC, the NJDGE or any other governmental
agency which regulates gaming in a jurisdiction in which the Partnership
conducts gaming activities.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained herein guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (a) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (b) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, (c) to supply funds to, or
in any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (d) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (e) otherwise to assure a creditor against loss;
provided that the term "guaranty" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business; provided further,
that the obligations of the Partnership pursuant to the Services Agreement as in
effect on the date of the Senior Note Indenture shall not be deemed to be
Guaranteed Debt of the Partnership.
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"Indebtedness" means, with respect to any Person, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock or Equity Interest of such Person, or any warrants, rights or
options to acquire such Capital Stock or Equity Interest, now or hereafter
outstanding, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (c) every obligation of such Person
issued or contracted for as payment in consideration of the purchase by such
Person or an Affiliate of such Person of the Capital Stock or Equity Interest or
substantially all of the assets of another Person or in consideration for the
merger or consolidation with respect to which such Person or an Affiliate of
such Person was a party, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables and other accrued current
liabilities arising in the ordinary course of business, (e) all obligations
under interest rate contracts of such Person, (f) all Capital Lease Obligations
of such Person, (g) all Indebtedness referred to in clauses (a) through (f)
above of other Persons and all dividends of other Persons, the payment of which
are secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien, upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (h) all Guaranteed Debt of such Person, (i) all Redeemable
Capital Stock or Redeemable Equity Interests valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, and (j) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (a)
through (i) above. The "maximum fixed repurchase price" of any Redeemable
Capital Stock or Redeemable Equity Interest which does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Redeemable Capital Stock or Redeemable Equity Interest as if such Redeemable
Capital Stock or Redeemable Equity Interest were purchased on any date on which
Indebtedness will be required to be determined pursuant to the Senior Note
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock or Redeemable Equity Interest, such Fair
Market Value to be determined in good faith by the board of directors of the
issuer (or managing general partner of the issuer) of such Redeemable Capital
Stock or Redeemable Equity Interest.
"Indenture Obligations" means the obligations of Funding, the Partnership
and any other obligor under the Senior Note Indenture or under the Senior Notes,
to pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the Senior Note
Indenture, the Senior Notes and the performance of all other obligations to the
Senior Note Trustee and the holders under the Senior Note Indenture, the Senior
Notes and the Senior Note Mortgage, according to the terms thereof.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
April 17, 1998 among Funding, TCHI, the Partnership, the Senior Note Trustee,
the TCHI Note Trustee, the trustee under the Mortgage Note Indenture, and the
trustee under the PIK Note Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Senior Notes.
"Investments" means, with respect to any Person, directly or indirectly,
any advance, loan or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or other
acquisition by such Person of any Capital Stock, Equity Interest, bonds, notes,
debentures or other securities or assets issued or owned by, anyother Person.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Marina Lease" means the lease agreement of September 1, 1990 between the
State of New Jersey, as landlord, and the Partnership, as tenant, with respect
to the property known as the Senator Frank S. Farley Marina in Atlantic City,
together with all amendments, restatements, extensions and renewals thereof.
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"Maturity" when used with respect to any Senior Note means the date on
which the principal of such Senior Note becomes due and payable as therein
provided or as provided in the Senior Note Indenture, whether at Stated
Maturity, Change of Control Purchase Date, or Redemption Date and whether by
declaration of acceleration, Change of Control Offer, call for redemption or
otherwise.
"Mortgage Debt" means any Indebtedness secured by Liens (other than
involuntary Liens) on any portion of the Collateral.
"Mortgage Notes" means the 11 3/4% Mortgage Notes due 2003 issued by
Funding.
"Mortgage Note Indenture" means that certain indenture among Funding, as
issuer, the Partnership, as guarantor, and First Bank National Association (now
known as U.S. Bank National Association), as trustee, dated as of December 28,
1993, relating to Funding's 11 3/4% Mortgage Notes due 2003 as it may from time
to time be supplemented or amended by one or more indentures supplemental
thereto.
"Net Cash Proceeds" of an issuance means the cash proceeds of such
issuance, net of attorneys' fees, accountants' fees, brokerage, consultant,
underwriting and other fees and expenses actually incurred in connection with
such issuance, sale, conversion or exchange and net of taxes paid or payable as
a result thereof.
"NJDGE" means the New Jersey Division of Gaming Enforcement or any
successor entity thereto.
"Outstanding" when used with respect to Senior Notes means, as of the date
of determination, all Senior Notes theretofore authenticated and delivered under
the Senior Note Indenture, except:
(a) Senior Notes theretofore canceled by the Senior Note Trustee or
delivered to the Senior Note Trustee for cancellation;
(b) Senior Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Senior Note Trustee or any Paying Agent (other than Funding) in trust or
set aside and segregated in trust by Funding (if Funding shall act as its
own Paying Agent) for the holders of such Senior Notes; provided that if
such Senior Notes are to be redeemed, notice of such redemption has been
duly given pursuant to the Senior Note Indenture or provision therefor
satisfactory to the Senior Note Trustee has been made; and Senior Notes,
except to the extent provided in the Senior Note Indenture, with respect to
which Funding has effected defeasance or covenant defeasance as provided in
Article Four of the Senior Note Indenture; and
(c) Senior Notes in exchange for or in lieu of which other Senior
Notes have been authenticated and delivered pursuant to the Senior Note
Indenture, other than any such Senior Notes in respect of which there shall
have been presented to the Senior Note Trustee proof satisfactory to it
that such Senior Notes are held by a bona fide purchaser in whose hands the
Senior Notes are valid obligations of Funding;
provided, however, that in determining whether the holders of the requisite
principal amount of outstanding Senior Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Senior Notes
owned by Funding, the Partnership, or any other obligor upon the Senior Notes or
any Affiliate of Funding, the Partnership, any Guarantor or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Senior Note Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Senior Notes which the Senior Note Trustee knows to be so owned shall be so
disregarded. Senior Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Senior Note Trustee the pledger's right so to act with respect to such Senior
Notes and that the pledgee is not Funding, the Partnership or any other obligor
upon the Senior Notes or any Affiliate of Funding, the Partnership or such other
obligor.
"Outstanding Amount" of any Indebtedness at any time means the principal
amount outstanding of such Indebtedness at such time, unless such Indebtedness
was issued at a discount, in which case the "Outstanding Amount" of such
Indebtedness means the original issue price of such Indebtedness plus the
accretion to such time of the original issue discount, determined in accordance
with GAAP.
"Pari Passu Indebtedness" means any Indebtedness of the Partnership that is
pari passu in right of payment to the Senior Guarantee.
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"Partnership Agreement" means the Partnership's Third Amended and Restated
Partnership Agreement, dated as of October 7, 1996, in the form filed as an
exhibit to the Registration Statement of which this Prospectus is a part, as
amended from time to time in accordance with the terms thereof and the Senior
Note Indenture.
"Permit" means any license, franchise, authorization, statement of
compliance, certificate of operation, certificate of occupancy and permit
required for the lawful ownership, occupancy, operation and use of all or a
material portion of the Collateral whether held by the Partnership or any other
Person (which may be temporary or permanent) (including, without limitation,
those required for the use of the Casino-Hotel as a licensed casino facility),
in accordance with all applicable Legal Requirements (as defined in the Senior
Note Mortgage).
"Permitted Holder" means Donald J. Trump and any corporations or other
entities that are controlled by Donald J. Trump.
"Permitted Indebtedness" means the following:
(a) Indebtedness of the Partnership and Funding pursuant to the Senior
Mortgage Documents and the Senior Note Indenture;
(b) Indebtedness of the Partnership pursuant to any Working Capital
Facility (including in connection with the TCHI Notes and the TCHI Note
Indenture);
(c) Indebtedness of the Partnership and Funding pursuant to the
Mortgage Note Indenture and the Mortgage Documents (as defined in the
Mortgage Note Indenture);
(d) Indebtedness of the Partnership and Funding pursuant to the PIK
Note Indenture and the Pledge Agreement (as defined in the PIK Note
Indenture);
(e) Indebtedness of the Partnership outstanding on the date of the
Senior Note Indenture and listed on a schedule attached to the Senior Note
Indenture;
(f) Indebtedness of the Partnership or any Wholly Owned Subsidiary to
any one or the other of them;
(g) Indebtedness of the Partnership or any Subsidiary represented by
F,F&E Financing Agreements of the Partnership not to exceed at any one time
outstanding (i) $2,000,000 or (ii) $25,000,000 following the time at which
the Partnership shall have achieved EBITDA (as defined in the Partnership
Agreement) for any period of four consecutive fiscal quarters in an amount
not less than $45,000,000;
(h) Indebtedness in respect of Capital Lease Obligations or secured
purchase money security interests of the Partnership or any Subsidiary, in
either case not created by an F,F&E Financing Agreement, provided, however,
that the aggregate principal amount of all such Capitalized Lease
Obligations permitted by the Senior Note Indenture shall not exceed at any
one time outstanding (i) $10,000,000 or (ii) $15,000,000 following the time
at which the Partnership shall have achieved EBITDA for any period of four
consecutive fiscal quarters in an amount not less than $60,000,000 and
provided, further, that the aggregate principal amount of all such
Indebtedness secured by purchase money security interests shall not exceed
at any one time outstanding $10,000,000; and
(i) any renewals, extensions, substitutions, refundings, refinancings
or replacements of any Indebtedness described in clauses (a) through (h) of
the definition of "Permitted Indebtedness," including any successive
renewals, extensions, substitutions, refundings, refinancings or
replacements so long as the aggregate principal amount of Indebtedness
represented thereby does not exceed the principal amount of such
Indebtedness being renewed, extended, substituted, refunded, refinanced or
replaced (or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
plus accrued interest thereon, plus, in the case of refinancings, the
amount of any premium or other payment required to be paid under the terms
of the instrument governing such Indebtedness or the amount of any premium
reasonably determined by the Partnership as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated purchase
and, in each case, actually paid, plus the amount of expenses of the
Partnership incurred in connection with such refinancing and such renewal,
extension, substitution, refinancing or replacement does not reduce the
Average Life to Stated Maturity or the final Stated Maturity of such
Indebtedness.
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"Permitted Investment" means (a) Investment in any of the Senior Notes,
TCHI Notes, Mortgage Notes or PIK Notes; (b) Temporary Cash Investments; (c)
intercompany notes to the extent permitted under the definition of "Permitted
Indebtedness"; and (d) any Investments in existence on the date of the Senior
Note Indenture and listed on a schedule attached to the Senior Note Indenture.
"Permitted Leases" means the following:
(i) the Marina Lease;
(ii) any Capital Lease Obligation permitted by clause (i) of the
definition of "Permitted Indebtedness"; and
(iii) Leases other than Capital Lease Obligations and the Marina
Lease; provided, however, that the aggregate fixed rental payments paid or
accrued for any period of four consecutive fiscal quarters commencing after
the date hereof under all such leases (including payments required to be
made by the lessee in respect of taxes and insurance, whether or not
denominated as rent), shall not exceed for such period (a) $2,000,000 or
(b) $7,500,000 following the time at which the Partnership shall have
achieved EBITDA for any period of four consecutive fiscal quarters in an
amount not less than $45,000,000.
"Permitted Liens" means:
(a) any Lien existing as of the date of the Senior Note Indenture
under the Senior Note Mortgage, the Senior Guarantee Mortgage, the Mortgage
Documents (including, without limitation, "Permitted Encumbrances" and
"Restricted Encumbrances", both as defined in the Note Mortgage), the
Pledge Agreement (as defined in the PIK Note Indenture), "Permitted
Encumbrances" hereafter arising and permitted under the Mortgage Documents,
or any Lien thereafter arising under any Working Capital Facility
(including, without limitation, under the TCHI Note Indenture);
(b) Capital Lease Obligations and purchase money liens included in
Permitted Indebtedness;
(c) the Liens in favor of the Senior Note Trustee pursuant to Section
6.6 of the Senior Note Indenture, in favor of the TCHI Note Trustee
pursuant to Section 6.6 of the TCHI Note Indenture, in favor of the
Mortgage Note Trustee pursuant to Section 6.6 of the Mortgage Note
Indenture and in favor of the PIK Note Trustee pursuant to Section 6.6 of
the PIK Note Indenture;
(d) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (ii) security for payment of workmen's compensation or other
insurance; (iii) good faith deposits in connection with tenders, leases,
contracts (other than contracts for the payment of money); and (iv)
deposits to secure public or statutory obligations, or in lieu of surety or
appeal bonds; and
(e) any Lien arising by reason of any renewal, extension,
substitution, refunding, refinancing or replacement of any Indebtedness
permitted by clause (j) of the definition of Permitted Indebtedness.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PIK Note Indenture" means that certain indenture among Funding, as issuer,
the Partnership, as guarantor, and First Bank National Association (now known as
U.S. Bank National Association), as trustee, dated as of December 28, 1993,
relating to the Issuer's PIK Notes as it may from time to time be supplemented
or amended by one or more indentures supplemental thereto.
"PIK Notes" means the Subordinated Pay-in-Kind Notes due 2005 issued by
Funding in an initial aggregate principal amount of $52,066,000 plus the
aggregate principal amount of PIK Notes issued as payment of interest thereon.
"Predecessor Senior Note" of any particular Senior Note means every
previous Senior Note evidencing all or a portion of the same debt as that
evidenced by such particular Senior Note; and, for the purposes of this
definition,
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any Senior Note authenticated and delivered pursuant to the Senior Note
Indenture in exchange for a mutilated Senior Note or in lieu of a lost,
destroyed or stolen Senior Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Senior Note.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the date of the Senior Note Indenture, and including, without limitation, all
classes and series of preferred or preference stock.
"Public Offering" shall mean a registered public offering of a direct or
indirect equity interest in the Partnership.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Qualified Equity Interest" of any Person means any Equity Interests of
such Person other than Redeemable Equity Interests.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event (other than the
disqualification of the holder thereof by the CCC) or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Senior Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
"Redeemable Equity Interest" means any Equity Interest that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event (other than the
disqualification of the holder thereof by the CCC) or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Senior Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
"Redemption Date" when used with respect to any Senior Note to be redeemed
means the date fixed for such redemption by or pursuant to the Senior Note
Indenture.
"Redemption Price" when used with respect to any Senior Note to be redeemed
means the price at which it is to be redeemed pursuant to the Senior Note
Indenture.
"Registrable Series A Senior Notes" means the Series A Senior Notes upon
original issuance thereof, and at all times subsequent thereto, until, in the
case of such Series A Senior Note, (A) a registration statement with respect to
such Series A Senior Note has been declared effective under the Securities Act
and such Series A Senior Note has been disposed of in accordance with such
registration statement; (B) such Series A Senior Note is distributed to the
public pursuant to Rule 144 (or any successor provisions) promulgated under the
Securities Act; (C) such Series A Senior Note has been otherwise transferred and
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Issuer; or (D) such Series A Senior Note ceases
to be outstanding.
"Registration Rights Agreement" means the registration rights agreement
dated as of April 17, 1998 between Funding, the Partnership, TCHI and certain
original purchasers of the Series A Senior Notes and Series A TCHI Notes (as
defined).
"Regular Record Date" for the interest payable on any Interest Payment Date
means the May 1 or November 1 (whether or not a Business Day) next preceding
such Interest Payment Date.
"Restoration" has the meaning set forth in the Senior Note Mortgage.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or if at any time after the
execution of the Senior Note Indenture such SEC is not existing and
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performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Assignment Agreement" means the Assignment Agreement between
Funding and the Senior Note Trustee providing for the assignment of the Senior
Partnership Note and the Senior Note Mortgage to the Senior Note Trustee by
Funding and acknowledgment thereof by the Partnership.
"Senior Guarantee" means the guaranty by the Partnership of Funding's
Indenture Obligations pursuant to the guaranty included in the Senior Note
Indenture.
"Senior Guarantee Mortgage" means the Indenture of Mortgage and Security
Agreement, dated as of the date of the Senior Note Indenture, between the
trustee under the Senior Note Indenture, as mortgagee, and the Partnership, as
mortgagor.
"Senior Mortgage Documents" means (i) the Senior Partnership Note, (ii) the
Senior Guarantee, (iii) the Senior Note Mortgage, (iv) the Senior Assignment,
(v) the Senior Guarantee Mortgage and (vi) any other security document to which
the Partnership, Funding or the Senior Note Trustee is a party, which is
executed and delivered pursuant to or in connection with the foregoing documents
described in clauses (i) through (vi), as each such agreement may be amended,
renewed, extended, substituted, refinanced, restructured, replaced, supplemented
or otherwise modified from time to time in accordance with the provisions of the
Senior Note Indenture and the Senior Mortgage Documents.
"Senior Note Mortgage" means the Indenture of Mortgage and Security
Agreement, dated as of April 17, 1998 between Funding, as mortgagee, and the
Partnership, as mortgagor.
"Senior Partnership Note" means the Partnership Note dated as of April 17,
1998 in the principal amount of $62,000,000 made by the Partnership in favor of
Funding.
"Senior Notes" means the 10 1/4% Senior Secured Notes due 2003 of Funding.
"Series A Senior Notes" means the 10 1/4% Series A Senior Secured Notes due
2003 of Funding.
"Series B Senior Notes" means the 10 1/4% Series B Senior Secured Notes due
2003 of Funding.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Partnership
subordinated in right of payment to the Senior Guarantee.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Partnership or by one or more other Subsidiaries, or by the Partnership and one
or more other Subsidiaries.
"Taking" means the acquisition or condemnation by eminent domain of the
whole or any part of the Premises (as such term is defined in the Senior Note
Mortgage), by a competent authority, for any public or quasi-public use or
purpose.
"TCHI" means Trump's Castle Hotel & Casino, Inc., a New Jersey corporation.
"TCHI Note Indenture" means the Indenture, dated as of April 17, 1998, by
and between TCHI, as issuer, the Partnership, as guarantor, and U.S. Bank
National Association, as trustee thereunder, with respect to the TCHI Notes.
"TCHI Note Mortgage" shall mean the "Senior Partnership Upstream Note
Mortgage", as such term is defined in the TCHI Note Indenture.
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"TCHI Note Mortgage Documents" shall have the meaning set forth in the TCHI
Note Indenture.
"TCHI Notes" means TCHI's 10 1/4% Senior Secured Notes due 2003 issued in
an original principal amount of $5,000,000 evidencing indebtedness of TCHI under
the Working Capital Facility.
"Temporary Cash Investments" means (a) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America, (b) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System and that has combined
capital and surplus and undivided profits of not less than $300,000,000, whose
debt has a rating, at the time as of which any investment therein is made, of
"P-1" (or higher) according to Moody's Investors Service, Inc. or any successor
rating agency, or "A-1" (or higher) according to Standard & Poor's Corporation
or any successor rating agency, (c) commercial paper, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate or subsidiary of Funding or the Partnership) organized and existing
under the laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Corporation or any successor rating agency, and
(d) any money market deposit accounts issued or offered by a domestic commercial
bank having capital and surplus in excess of $300,000,000.
"Total Taking or Casualty" means a Taking or Casualty with respect to
which, pursuant to the provisions of the Senior Note Mortgage, any proceeds
resulting from such Taking or Casualty are to be used to pay amounts due under
the Senior Notes and the Senior Note Mortgage and not for purposes of
Restoration.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by the Partnership or by one or more Wholly-Owned Subsidiaries or by
the Partnership and one or more Wholly-Owned Subsidiaries; provided, however,
that Funding shall not be considered a Wholly-Owned Subsidiary of the
Partnership.
DESCRIPTION OF THE TCHI NOTES
The TCHI Notes are issued by TCHI, the general partner of the Partnership,
in an aggregate principal amount of $5.0 million. The TCHI Notes and the TCHI
Note Indenture are otherwise substantially similar to the Senior Notes and the
Senior Note Indenture.
The 10 1/4% Series A Senior Secured Notes due 2003 of TCHI (the "Series A
TCHI Notes") were, and the 10 1/4% Series B Senior Secured Notes due 2003 of
TCHI (the "Series B TCHI Notes") offered hereby will be, issued under the TCHI
Note Indenture, dated as of April 17, 1998, by and among TCHI, as issuer, the
Partnership, as guarantor, and U.S. Bank National Association, as TCHI Note
Trustee, a copy of the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The form and terms of the Series B
TCHI Notes will be identical in all material respects to the form and terms of
the Series A TCHI Notes, except for certain registration rights which will
terminate upon consummation of the Exchange Offer. See "Prospectus
Summary--Terms of the Notes." The TCHI Note Indenture is subject to and is
governed by the Trust Indenture Act. The following is only a summary of the
material provisions of the TCHI Note Indenture and the TCHI Mortgage Documents
(as defined) as they relate to the TCHI Notes and does not purport to be
complete, and where reference is made to particular provisions of the TCHI Note
Indenture or the TCHI Mortgage Documents, such provisions, including the
definitions of certain terms, are qualified in their entirety by reference to
all the provisions of the TCHI Note Indenture and the TCHI Mortgage Documents
and those terms made a part of the TCHI Note Indenture and the TCHI Mortgage
Documents by the Trust Indenture Act. Unless otherwise specified, references to
Articles and Sections are to Articles and Sections of the TCHI Note Indenture.
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General
The TCHI Notes mature on April 30, 2003. Each TCHI Note bears interest
payable in cash at the rateof 10 1/4%.
Guarantee
The obligations of TCHI to pay the principal of, premium, if any, and
interest on, the TCHI Notes are unconditionally guaranteed by a non-recourse
senior guarantee of the Partnership. The guarantee is secured by a mortgage (the
"TCHI Note Guarantee Mortgage") on the assets of the Partnership, as described
under "--Security," pari passu to the lien of the TCHI Note Mortgage and the
liens securing the Senior Notes.
Security
The TCHI Notes are secured by an assignment by TCHI to the TCHI Note
Trustee, for the benefit of the holders of the TCHI Notes, of (a) the Senior
Partnership Upstream Note and (b) the Senior Partnership Upstream Note Mortgage
(the Senior Partnership Upstream Note, the Senior Partnership Upstream Note
Mortgage, the TCHI Note Guarantee Mortgage (which has been made directly to the
TCHI Note Trustee) and any ancillary documents executed by TCHI, the Partnership
or the TCHI Note Trustee for purposes of providing security for the benefit of
the holders of the TCHI Notes are referred to herein as the "TCHI Mortgage
Documents"), which encompasses a lien on (i) Trump Marina and the leasehold and
fee interests of the Partnership in the land on which Trump Marina and its
ancillary facilities are located, including certain additions and improvements
constructed thereon, and (ii) substantially all the other assets of the
Partnership.
The Senior Partnership Upstream Note contains interest, principal,
redemption and default terms which are virtually identical to those of the TCHI
Notes. The Senior Partnership Upstream Note Mortgage encumbers the Partnership's
interest in Trump Marina and in all other facilities owned by or leased to the
Partnership, including certain additions and improvements thereto and (except,
in certain circumstances, as permitted by the Senior Partnership Upstream Note
Mortgage, where such property is financed) substantially all furniture,
furnishings, fixtures, machinery and equipment at any time forming a part
thereof, or used in connection therewith. The Senior Partnership Upstream Note
Mortgage constitutes a lien and security interest on Trump Marina and such other
assets, subject to the prior liens securing permitted encumbrances and pari
passu with liens securing the Senior Notes and the remainder of the Working
Capital Facility, if incurred. See "Risk Factors--Limitations on Ability to
Realize on Collateral."
The Partnership has also executed the TCHI Note Guarantee Mortgage in favor
of the TCHI Note Trustee. The TCHI Note Guarantee Mortgage secures the
obligations of the Partnership under its senior guarantee. The lien of the TCHI
Note Guarantee Mortgage is pari passu with the lien of the Senior Partnership
Upstream Note Mortgage. The Senior Partnership Upstream Note Mortgage and the
TCHI Note Guarantee Mortgage have substantially identical terms, secure
essentially the same debt and constitute a lien on the same assets. They have
both been executed so as to provide to the TCHI Note Trustee and the holders of
the TCHI Notes alternative remedies, such that in the event legal or equitable
defenses were successfully raised against enforcement of one of the mortgages,
foreclosure could nevertheless be pursued under the other mortgage.
Certain of the Partnership's intangible assets that may be significant to
its operations, such as computer software licenses, are by their terms not
assignable and, accordingly, are not included in the property subject to the
Senior Partnership Upstream Note Mortgage and the TCHI Note Guarantee Mortgage.
Ranking
In connection with the Initial Offering and the related refinancing, the
Partnership entered into an Intercreditor Agreement with the Senior Note
Trustee, the TCHI Note Trustee, the Mortgage Note Trustee and the PIK Note
Trustee pursuant to which the Partnership agreed not to make any payments with
respect to the Mortgage Notes and the PIK Notes, and the Mortgage Note Trustee
and the PIK Note Trustee have each been prohibited from realizing on the
collateral with respect to the Mortgage Notes and the PIK Notes, for so long as
there exists any payment default on the Senior Notes or the TCHI Notes. As of
April 30, 1998, there is an aggregate principal amount of
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$62.0 million in Senior Notes outstanding and an aggregate principal amount of
$5.0 million in TCHI Notes outstanding.
TCHI is prohibited from incurring additional Indebtedness other than
Indebtedness with respect to the TCHI Notes and any intercompany loan from the
Partnership and the Partnership is subject to restrictions on the incurrence of
any additional Indebtedness.
Non-Recourse
The Senior Partnership Upstream Note and the senior guarantee are
non-recourse to the partners ofthe Partnership.
Mandatory Redemption
Pursuant to the Casino Control Act, TCHI may redeem TCHI Notes at the lower
of the principal amount or the Fair Market Value (as defined) thereof held by
Persons that are found by the CCC not to be qualified to hold such securities
and who fail to dispose of such securities within 30 days after notice of such
finding.
TCHI must also redeem the TCHI Notes at the principal amount thereof,
without premium, plus accrued interest, at any time as a result of a Total
Taking or Casualty.
Optional Redemption
TCHI and the Partnership may at their election redeem all, but not less
than all, of the TCHI Notes at 100% of the principal amount thereof, together
with accrued and unpaid interest through the redemption date, provided that no
redemption of the TCHI Notes may be made unless the Partnership or Funding
concurrently redeems all of the Senior Notes pursuant to the Senior Note
Indenture.
Certain Covenants
The TCHI Notes contain covenants substantially similar to those contained
in the Senior Note Indenture including covenants relating to, among other
things, (i) limitations on indebtedness, (ii) limitations on liens, (iii)
restrictions on activities, (iv) restricted payments, (v) transactions with
affiliates, (vi) consolidation, merger, conveyance or transfer, and (vii) a
provision that each holder of TCHI Notes may require the issuer of such TCHI
Notes to repurchase such TCHI Notes at a purchase price of 101% of par upon the
occurrence of a Change of Control (as such term is defined in the TCHI Note
Indenture).
Merger and Sale of Assets, etc.
The TCHI Note Indenture contains conditions governing mergers and sales of
assets substantially similar to those set forth in the Senior Note Indenture.
Events of Default
The TCHI Note Indenture contains events of default substantially similar to
those set forth in the Senior Note Indenture.
Defeasance or Covenant Defeasance of TCHI Note Indenture
The TCHI Note Indenture contains provisions governing defeasance and
covenant defeasance substantially similar to those set forth in the Senior Note
Indenture.
Registration Rights
The Registration Rights Agreement provides for registration of the TCHI
Notes on terms substantially similar to those for the Senior Notes.
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DESCRIPTION OF OTHER INDEBTEDNESS
The Mortgage Notes
The Mortgage Notes were issued under the Mortgage Note Indenture. The
following is only a summary of the terms of the Mortgage Notes, does not purport
to be a full description thereof, and is qualified in its entirety by reference
to the Mortgage Note Indenture, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
General
The Mortgage Notes mature on November 15, 2003. Each Mortgage Note bears
interest payable in cash at the rate of 11 3/4%. Notwithstanding the foregoing,
if, as of a date prior to November 15, 1998, Funding has defeased or redeemed
all the then outstanding PIK Notes through the application of the proceeds of
one or more Equity Offerings or of internally generated funds and not through
the incurrence of additional indebtedness, then on and after the first day of
the calendar month next commencing after such date, the aforesaid interest rate
of 11 3/4% per annum will be reduced to 11 1/2% per annum. The ability of the
Partnership to make payments on the Partnership Note to fund the payment of
interest on the Mortgage Notes is restricted by the terms of the Senior Note
Indenture and the TCHI Note Indenture. See "Description of the Senior
Notes--Certain Covenants--Limitation on Restricted Payments" and "Description of
the TCHI Notes--Certain Covenants."
Guarantee
The obligations of Funding to pay the principal of, premium, if any, and
interest on, the Mortgage Notes are unconditionally guaranteed by a non-recourse
guarantee of the Partnership. The guarantee is secured by a mortgage (the
"Guarantee Mortgage") encumbering substantially all of the property of the
Partnership on a basis pari passu to the lien of the Note Mortgage.
Security
The Mortgage Notes are secured by an assignment by Funding to the Mortgage
Note Trustee, for the benefit of the holders of the Mortgage Notes, of (a) the
Partnership Note and (b) the Note Mortgage (the Partnership Note, the Note
Mortgage, the Guarantee Mortgage and any ancillary documents executed by
Funding, the Partnership or the Mortgage Note Trustee for purposes of providing
security for the benefit of the holders of the Mortgage Notes are referred to
herein as the "Mortgage Documents") which encompasses a lien on (i) Trump Marina
and the leasehold and fee interests of the Partnership in the land on which
Trump Marina and its ancillary facilities are located, including certain
additions and improvements constructed thereon, and (ii) substantially all the
other assets of the Partnership.
The Partnership Note contains interest, principal, redemption and default
terms which are virtually identical to those of the Mortgage Notes. The Note
Mortgage and Guarantee Mortgage each constitute a lien and security interest on
Trump Marina and such other assets, subject to the prior lien securing the
Senior Note Mortgage, the Senior Guarantee Mortgage, the TCHI Note Mortgage, the
Senior Upstream Partnership Note Mortgage and the lien, if any, securing any
additional Working Capital Facility that may be obtained, and other permitted
encumbrances.
Ranking
In connection with the Initial Offering and the related refinancing, the
Partnership entered into an Intercreditor Agreement with the Senior Note
Trustee, the TCHI Note Trustee, the Mortgage Note Trustee and the PIK Note
Trustee pursuant to which the Partnership agreed not to make any payments with
respect to the Mortgage Notes and the PIK Notes, and the Mortgage Note Trustee
and the PIK Note Trustee have each been prohibited from realizing on the
collateral with respect to the Mortgage Notes and the PIK Notes, for so long as
there exists any payment default on the Senior Notes or the TCHI Notes. As of
April 30, 1998, there is an aggregate principal amountof $62.0 million in Senior
Notes outstanding and an aggregate principal amount of $5.0 million in TCHI
Notes outstanding.
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Non-Recourse
The Partnership Note and the guarantee are non-recourse to the partners of
the Partnership.
Mandatory Redemption
Pursuant to the Casino Control Act, Funding may redeem Mortgage Notes at
the lower of the principal amount or the Fair Market Value (as defined) thereof
held by Persons that are found by the CCC not to be qualified to hold such
securities and who fail to dispose of such securities within 30 days after
notice of such finding.
Funding must also redeem the Mortgage Notes at the principal amount
thereof, without premium, plus accrued interest, at any time as a result of a
Total Taking or Casualty.
Optional Redemption
The Mortgage Notes are subject to redemption at any time on or after
December 31, 1998, at the option of Funding or the Partnership, in whole or in
part, on not less than 30 nor more than 60 days' prior notice, in amounts of
$1,000 or an integral multiple thereof at the following redemption prices
(stated as percentages of the principal amount), if redeemed during the 12-month
periods beginning on December 31, of the years indicated below:
Redemption Price
Prior to Interest After Interest
Year Rate Reduction Rate Reduction
---- -------------- --------------
1998 ........................... 105.8750% 105.7500%
1999 ........................... 103.9170% 103.8333%
2000 ........................... 101.9580% 101.9167%
and, thereafter at 100% of principal amount, in each case together with accrued
and unpaid interest, if any, through the Redemption Date. The ability of the
Partnership to prepay the Partnership Note to fund the optional redemption of
the Mortgage Notes is restricted by the terms of the Senior Note Indenture and
the TCHI Note Indenture. See "Description of the Senior Notes--Certain
Covenants--Limitation on Restricted Payments."
Events of Default
The Mortgage Note Indenture contains events of default substantially
similar to those set forth in the Senior Note Indenture and the TCHI Note
Indenture.
Certain Covenants
The Mortgage Notes contain covenants substantially similar to those
contained in the Senior Note Indenture and the TCHI Note Indenture including
covenants relating to, among other things, (i) limitations on indebtedness, (ii)
limitations on liens, (iii) restrictions on activities, (iv) restricted
payments, (v) transactions with affiliates, (vi) consolidation, merger,
conveyance or transfer, and (vii) a provision that each holder of Mortgage Notes
may require the issuer of such Mortgage Notes to repurchase such Mortgage Notes
at a purchase price of 101% of par upon the occurrence of a Change of Control
(as such term is defined in the Mortgage Note Indenture).
The PIK Notes
The PIK Notes were issued pursuant to the PIK Note Indenture. The following
is only a summary of the terms of the PIK Notes, does not purport to be a full
description thereof, and is qualified in its entirety by reference to the PIK
Note Indenture, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
General
The PIK Notes will mature on November 15, 2005. Each PIK Note bears
interest at the rate of 7% through September 30, 1994 and thereafter at the rate
of 13 7/8%, payable semi-annually in arrears on May 15 and November 15 each
year. On or prior to November 15, 2003, interest may, at the option of Funding,
be paid in whole or in part,
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in cash or through the issuance of additional PIK Notes. After November 15, 2003
interest on the PIK Notes will be payable only in cash.
The ability of the Partnership to make payments on the Subordinated
Partnership Note to fund the payment of cash interest on the PIK Notes is
restricted by the terms of the Senior Note Indenture, the TCHI Note Indenture
and the Mortgage Note Indenture. See "Description of the Senior Notes--Certain
Covenants--Limitation on Restricted Payments," "Description of the TCHI
Notes--Certain Covenants" and "--The Mortgage Notes."
Guarantee
The obligations of Funding to pay the principal of, premium, if any, and
interest on the PIK Notes are guaranteed by the Subordinated Guarantee, a
non-recourse guaranty of the Partnership.
Security
The PIK Notes are secured by an assignment by Funding to the PIK Note
Trustee, for the benefit of the holders of the PIK Notes of the Subordinated
Partnership Note. The Subordinated Partnership Note contains interest,
principal, redemption and default terms which are virtually identical to those
of the PIK Notes.
Ranking
In connection with the Initial Offering and the related refinancing, the
Partnership entered into an Intercreditor Agreement with the Senior Note
Trustee, the TCHI Note Trustee, the Mortgage Note Trustee and the PIK Note
Trustee pursuant to which the Partnership agreed not to make any payments with
respect to the Mortgage Notes and the PIK Notes, and the Mortgage Note Trustee
and the PIK Note Trustee have each been prohibited from realizing on the
collateral with respect to the Mortgage Notes and the PIK Notes, for so long as
there exists any payment default on the Senior Notes or the TCHI Notes. As of
April 30, 1998, there an aggregate principal amount of $62.0 million in Senior
Notes outstanding and an aggregate principal amount of $5.0 million in TCHI
Notes outstanding.
Non-Recourse
The Subordinated Partnership Note and the Subordinated Guarantee are
non-recourse to the partners of the Partnership.
Mandatory Redemption
In the event of an Equity Offering, the Partnership or Funding is required,
within 30 days after receipt of the proceeds thereof, to use 35% of the net
proceeds of such Equity Offering to redeem outstanding PIK Notes, at a
redemption price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the redemption date.
Pursuant to the Casino Control Act, Funding may redeem PIK Notes at the
lower of the principal amount or the Fair Market Value (as defined) thereof held
by Persons that are found by the CCC not to be qualified to hold such securities
and who fail to dispose of such securities within 30 days after notice of such
finding.
Funding may also redeem PIK Notes at the principal amount thereof, without
premium, plus accrued interest, at any time as a result of a Total Taking or
Casualty.
Optional Redemption
The PIK Notes are subject to redemption at any time, at the option of
Funding, in whole or in part, on not less than 30 nor more than 60 days' prior
notice, in amounts of $1 or an integral multiple of $1 at 100% of the principal
amount, together with accrued and unpaid interest through the redemption date.
The ability of the Partnership to prepay the Partnership Note to fund the
optional redemption of the PIK Notes is restricted by the terms of the Senior
Note Indenture, the TCHI Note Indenture and the Mortgage Note Indenture. See
"Description of the Senior Notes--Certain Covenants--Limitation on Restricted
Payments," "Description of the TCHI Notes--Certain Covenants" and "--The
Mortgage Notes."
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Events of Default
The PIK Note Indenture contains events of default substantially similar to
those set forth in the Senior Note Indenture, the TCHI Note Indenture and the
Mortgage Note Indenture, other than events of default relating to collateral.
Certain Covenants
The PIK Notes contain certain covenants and events of default substantially
similar to those contained in the Senior Note Indenture including covenants
relating to, among other things, (i) limitations on indebtedness, (ii)
limitations on liens, (iii) restrictions on activities, (iv) restricted
payments, (v) transactions with affiliates, (vi) consolidation, merger,
conveyance or transfer, and (vii) a provision that each holder of PIK Notes may
require the issuer of such PIK Notes to repurchase such PIK Notes at a purchase
price of 101% of par upon the occurrence of a Change of Control (as such term is
defined in the PIK Note Indenture).
As of March 31, 1998, THCR Holdings held approximately $72.5 million
principal amount of PIK Notes, representing approximately 90% of the outstanding
PIK Notes.
ORIGINAL NOTES REGISTRATION RIGHTS
The Issuers and the Initial Purchaser entered into the Registration Rights
Agreement on the Closing Date of the Initial Offering, pursuant to which the
Issuers agreed for the benefit of the Holders of the Original Notes to, at their
cost, (i) on or prior to July 17, 1998 file the Registration Statement under the
Securities Act with the Commission with respect to the Exchange Offer, with
terms substantially identical in all material respects to the Original Notes
(except that such Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) to use its reasonable best efforts to cause such
Registration Statement to be declared effective under the Securities Act by
September 21, 1998. Upon such Registration Statement being declared effective,
the Issuers will offer Exchange Notes in exchange for properly tendered Original
Notes. The Issuers will keep the Exchange Offer open for not less than 20
consecutive business days (or longer if required by applicable law) after the
date notice of such Exchange Offer is mailed to the Holders of the Original
Notes. For each Original Note surrendered to the Issuers pursuant to such
Exchange Offer, the Holder of such Original Note will receive Exchange Notes
having a principal amount at maturity equal to that of the surrendered Original
Note.
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealers in connection with resales of the Exchange Notes. A broker-dealer
which delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
Each Holder of the Original Notes that wishes to exchange such Original
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Issuers, or if it is an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
If the Holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the Holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
In the event that applicable interpretations of the Staff of the Commission
do not permit the Issuers to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 120 days after commencement
thereof, the Issuers will, at their own expense, (a) prior to July 17, 1998,
file a Shelf Registration
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Statement covering resales of the Original Notes, (b) use their best efforts to
cause such Shelf Registration Statement to be declared effective under the
Securities Act on or prior to September 21, 1998 and (c) use their best efforts
to keep effective such Shelf Registration Statement until the earlier of 24
months from the effectiveness date and such time as all of the Original Notes
have been sold thereunder. The Issuers will, in the event a Shelf Registration
Statement is required to be filed, provide to each Holder of the Original Notes
copies of the prospectus which is a part of such Shelf Registration Statement,
notify each Holder when such Shelf Registration Statement for the Original Notes
has become effective and take certain other actions as are required to permit
unrestricted resales of the Original Notes. A Holder of the Original Notes who
sells such Original Notes pursuant to the Shelf Registration Statement generally
would be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a Holder (including certain
indemnification and contribution rights and obligations).
If (a) either of the registration statements described above is not filed
on or before the date specified for such filing, (b) either of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) an
Registration Statement becomes effective but the Issuers fail to consummate the
Exchange Offer within 120 days after commencement thereof or (d) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of the Original Notes during the
period specified in the Registration Rights Agreement (each such event referred
to in clauses (a) through (d) above, a Registration Default), then the Issuers
will pay liquidated damages ("Liquidated Damages") to each Holder of the
Original Notes, with respect to the first 60-day period immediately following
the occurrence of such Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of the Original Notes held by such Holder. Upon a
Registration Default, Liquidated Damages will accrue at the rate specified above
until such Registration Default is cured and after such 60-day period the amount
of Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Original Notes. All accrued Liquidated Damages will be paid
by the Issuers on each interest payment date to the Holders of Original Notes by
wire transfer of immediately available funds or by mailing checks to their
registered addresses if no such accounts have been specified.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectusis a part.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material United States federal income
tax considerations for holders of the Notes. This discussion is the opinion of
Willkie Farr & Gallagher, New York, New York, counsel to the Issuers, and is
based upon existing United States federal income tax law, which is subject to
change, possibly retroactively. This discussion does not cover all aspects of
United States federal income taxation which may be important to particular
investors in light of their individual investment circumstances, such as Notes
held by investors subject to special tax rules (e.g., financial institutions,
insurance companies, broker-dealers, traders in securities, tax-exempt
organizations, and, except to the extent described below, non-"United States
Holders" (as defined)) or to persons that will hold the Notes as part of a
straddle, hedging, or "synthetic" security transaction for United States federal
income tax purposes or that have a functional currency other than the United
States dollar, all of whom may be subject to tax rules that differ significantly
from those discussed below. In addition, this discussion does not discuss any
foreign, state, or local tax considerations. This discussion assumes that
investors will hold their Notes as "capital assets" (generally, property held
for investment) under the United States Internal Revenue code of 1986, as
amended (the "Code"). Prospective investors are urged to consult their tax
advisors regarding the United States federal, state, local, and foreign income
and other tax considerations of the purchase, ownership, and disposition of the
Notes.
For purposes of this discussion, a "United States Holder" is a beneficial
owner of a Note that is (i) an individual who is a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized under the laws of the United States or any state or political
subdivision thereof, (iii) an estate the income
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of which is subject to United States federal income taxation regardless of its
source, or (iv) a trust the administration of which is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust.
No Original Issue Discount
Since the Exchange Notes will have the same principal amount and interest
rate as the Original Notes, which were issued at par, there should be no
original issue discount.
The Exchange Offer
The exchange of Original Notes for Exchange Notes by holders pursuant to
the Exchange Offer should not be a taxable exchange for federal income tax
purposes, and holders should not recognize any taxable gain or loss or any
interest income as a result of such exchange.
United States Holders
Interest
Stated interest on a Note will be taxable to a United States Holder as
ordinary interest income at the time that such interest accrues or is received,
in accordance with the United States Holder's regular method of accounting for
federal income tax purposes.
Subsequent Sale or Exchange
The subsequent sale, exchange, redemption or other disposition of a Note
generally will be a taxable event for U.S. federal income tax purposes. In such
event a United States Holder of a Note will recognize gain or loss in an amount
equal to the excess of the amount realized (reduced by any amount attributable
to accrued but unpaid stated interest) over the United States Holder's adjusted
tax basis in such Note. Except with respect to accrued market discount (as
explained below), such gain or loss will generally be capital gain or loss. Net
capital gain (i.e., generally capital gain in excess of capital loss) recognized
by an individual upon the sale of a Note that has been held more than 12 months
will generally be subject to tax at a rate not to exceed 20 percent. If held for
12 months or less, the net capital gain will be subject to tax at ordinary
income rates. In addition, capital gain recognized by a corporate taxpayer upon
the sale of a Note will be subject to tax at the ordinary income tax rates
applicable to corporations.
If in a subsequent sale a Note is purchased for an amount less than its
stated redemption price at maturity, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a stated de minimis amount. Under the market discount
rules, a United States Holder will be required to treat any gain on the sale,
exchange, retirement or other disposition of a Note as ordinary income to the
extent of the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
IRS.
95
<PAGE>
Non-United States Holders
Interest
Interest paid by the Issuers to a non-United States Holder will not be
subject to United States federal income or withholding tax if (i) such interest
is not effectively connected with the conduct of a trade or business within the
United States by such non-United States Holder, (ii) the non-United States
Holder does not actually or constructively own a 10% or more interest in TCHI or
Funding and is not a controlled foreign corporation with respect to which the
Issuers are a "related person" within the meaning of the Code and (iii) the
requirements of section 871(h) or 881(c) of the Code are satisfied as described
below under the heading "--Owner Statement Requirement."
Gain on Disposition
A non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Note unless (i) the gain is effectively connected with the conduct of a
trade or business within the United States by the non-United States Holder or
(ii) in the case of a non-United States Holder who is a non-resident alien
individual, such Holder is present in the United States for 183 or more days in
the taxable year and certain other requirements are met.
Owner Statement Requirement
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and that holds a Note on behalf of such
owner file a statement with the Issuers or their agent to the effect that the
beneficial owner is not a United States person in order to avoid withholding of
United States Federal income tax. Under current regulations, this requirement
will be satisfied if the Issuers or their agent receive (i) a statement (an
"Owner's Statement") from the beneficial owner of a Note in which such owner
certifies, under penalties of perjury, that such owner is not a United States
person and provides such owner's name and address or (ii) a statement from the
Financial Institution holding the Note on behalf of the beneficial owner in
which the Financial Institution certifies, under penalties of perjury, that it
has received the Owner's Statement together with a copy of the Owner's
Statement. The beneficial owner must inform the Issuers or their agent (or, in
the case of a statement described in clause (ii) of the immediately preceding
sentence, the Financial Institution) within 30 days of any change in information
on the Owner's Statement.
Information Reporting and Backup Withholding
In the case of payments of interest (including accrued original issue
discount) to non-United States Holders, current Treasury regulations provide
that the 31% backup withholding tax and certain information reporting will not
apply to such payments with respect to which either an Owner's Statement has
been received or an exemption has otherwise been established; provided that
neither the Issuers not their payment agents have actual knowledge that the
Holder is a United States person or that the conditions of any other exemption
are not in fact satisfied. Under current Treasury regulations, these information
reporting and backup withholding requirements will apply, however, to the gross
proceeds paid to a non-United States Holder on the disposition of the Notes by
or through a United States office of a United States or foreign broker, unless
the Holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the Holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding, will
also apply to a payment of the proceeds of a disposition of the Notes by or
through a foreign office of a United States broker or foreign brokers with
certain types of relationships to the United States. Neither information
reporting nor backup withholding generally will apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
foreign broker not subject to the preceding sentence.
Recently, the Treasury Department has promulgated final regulations (the
"Final Regulations") regarding the withholding and information reporting rules
discussed above. In general the Final Regulations do not significantly alter the
substantive withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. Under the
Final Regulations, special rules apply which permit the shifting
96
<PAGE>
of primary responsibility for withholding to certain financial intermediaries
acting on behalf of beneficial owners. The Final Regulations are generally
effective for payments made after December 31, 1998, subject to certain
transition rules.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Service.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by Holders thereof (other than any Holder which
is (i) an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Issuers or (iii) broker-dealers who acquired Original Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such Holders'
business, and such Holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the Staff has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
exchange pursuant to the Exchange Offer (other than a resale of an unsold
allotment from the sale of the Original Notes to the Initial Purchaser) with the
prospectus contained in the Registration Statement. Pursuant to the Registration
Rights Agreement, the Issuers have agreed to permit Participating Broker-Dealers
and other persons, if any, subject to similar prospectus delivery requirements
to use this Prospectus in connection with the resale of such Exchange Notes. The
Issuers have agreed that, for a period not to exceed 180 days after the Exchange
Date, they will make this Prospectus, and any amendment or supplement to this
Prospectus, available to any broker-dealer that requests such documents in the
Letter of Transmittal.
Each Holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Issuers as set forth in "The Exchange Offer--Terms and
Conditions of the Letter of Transmittal." In addition, each Holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Original Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify Holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
97
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Issuers by
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019.
EXPERTS
The consolidated financial statements of the Issuers included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report for the year ended December 31, 1997, and
are included herein in reliance upon the authority of said firm as experts in
giving such report.
98
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Trump's Castle Associates, L.P. and Subsidiary
Reports of Independent Public Accountants ................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996 ............. F-4
Consolidated Statements of Operations for the year ended December 31,
1997, the period from October 7, 1996 through December 31, 1996, the
period from January 1, 1996 through October 6, 1996 and the year ended
December 31, 1995 ....................................................... F-5
Consolidated Statements of Partners' Capital for the year ended
December 31, 1997, the period from October 7, 1996 through December
31, 1996, the period from January 1, 1996 through October 6, 1996 and
the year ended December 31, 1995 ........................................ F-6
Consolidated Statements of Cash Flows for the year ended December 31,
1997, the period from October 7, 1996 through December 31, 1996, the
period from January 1, 1996 through October 6, 1996 and the year ended
December 31, 1995 ....................................................... F-7
Notes to Consolidated Financial Statements ................................ F-8
Condensed Consolidated Balance Sheets as of December 31, 1997 and
June 30, 1998 (unaudited) ............................................... F-17
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1997 and 1998 (unaudited) ......................... F-18
Condensed Consolidated Statement of Partners' Capital for the Six
Months Ended June 30, 1998 (unaudited) .................................. F-19
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1998 (unaudited) .................................. F-20
Notes to Condensed Consolidated Financial Statements (unaudited) .......... F-21
Trump's Castle Hotel & Casino, Inc.
Report of Independent Public Accountants................................... F-23
Balance sheet as of March 31, 1998 ........................................ F-24
Notes to Balance Sheet .................................................... F-25
Financial Statement Schedule
Reports of Independent Public Accountants ................................. S-1
Schedule II-Valuation and Qualifying Accounts for the year ended
December 31, 1997, the period from October 7, 1996 through December
31, 1996, the period from January 1, 1996 through October 6, 1996 and
the year ended December 31, 1995 ........................................ S-3
Other Schedules are omitted for the reason that they are not required or
are not applicable, or the required information is included in the consolidated
financial statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates, L.P.
And Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump's
Castle Associates, L.P. (a New Jersey limited partnership) and Subsidiary as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' capital and cash flows for the year ending December 31,
1997 and for the period from October 7, 1996 through December 31, 1996 (Note 2).
These consolidated financial statements and the schedule referred to below are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trump's Castle Associates,
L.P. and Subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the year ended December 31, 1997 and for the
period from October 7, 1996 through December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates, L.P.
And Subsidiary:
We have audited the accompanying consolidated statements of operations,
partners' capital and cash flows for the period from January 1, 1996 through
October 6, 1996 and for the year ended December 31, 1995 of Trump's Castle
Associates, L.P. (a New Jersey limited partnership) and Subsidiary (Note 2).
These consolidated financial statements and the schedule referred to below are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows for the
period from January 1, 1996 through October 6, 1996 and for the year ended
December 31, 1995 of Trump's Castle Associates, L.P. and Subsidiary, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 7, 1997
F-3
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Note 2)
ASSETS
<TABLE>
<CAPTION>
Successor
-----------------------------------
December 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................................. $ 14,472 $ 15,380
Trade receivables, less allowance for doubtful accounts of
$1,479 and $1,544, respectively (Note 3) ................................ 7,465 7,157
Accounts receivable, other ................................................ 563 539
Due from affiliate (Note 6) ............................................... -- 720
Inventories (Note 3) ...................................................... 3,090 1,298
Prepaid expenses and other current assets ................................. 1,713 1,560
--------- ---------
Total current assets .................................................. 27,303 26,654
--------- ---------
PROPERTY AND EQUIPMENT (Notes 2, 3, 4 and 5)
Land and land improvements ................................................ 90,918 90,911
Buildings and building improvements ....................................... 405,290 404,774
Furniture, fixtures and equipment ......................................... 25,175 17,582
Construction in progress .................................................. -- 1,428
--------- ---------
521,383 514,695
Less-Accumulated depreciation ............................................... 21,870 4,819
--------- ---------
499,513 509,876
--------- ---------
DUE FROM AFFILIATE (Note 6) ................................................. 1,250 1,250
--------- ---------
OTHER ASSETS ................................................................ 13,340 10,231
--------- ---------
Total assets .......................................................... $ 541,406 $ 548,011
========= =========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities-long term debt (Note 5) ................................ $ 7,954 $ 3,714
Trade accounts payable .................................................... 7,360 10,902
Due to affiliates (Note 6) ................................................ 23,949 1,712
Accrued payroll and related expenses ...................................... 5,568 5,861
Accrued interest payable (Note 4) ......................................... 4,020 4,020
Gaming liabilities ........................................................ 2,232 2,914
Self insurance reserves ................................................... 5,527 6,723
Other ..................................................................... 5,055 5,085
--------- ---------
Total current liabilities ............................................. 61,665 40,931
MORTGAGE NOTES, due 2003
(Net of discount of $30,170 and $33,071, respectively)
(Notes 4 and 9) ......................................................... 211,971 209,070
PIK NOTES, due 2005
(Net of discount of $7,197 and $7,509, respectively)
(Notes 4 and 9) ......................................................... 73,699 63,231
OTHER BORROWINGS (Note 5) ................................................... 55,673 63,283
OTHER LONG TERM LIABILITIES ................................................. 4,730 4,904
--------- ---------
Total liabilities ..................................................... 407,738 381,419
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
PARTNERS' CAPITAL (Notes 2, 4 and 6)
Contributed Capital ..................................................... 175,395 180,395
Accumulated Deficit ..................................................... (41,727) (13,803)
--------- ---------
Total partners' capital ............................................... 133,668 166,592
--------- ---------
Total liabilities and partners' capital ............................... $ 541,406 $ 548,011
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-4
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Note 2)
<TABLE>
<CAPTION>
Successor Predecessor
------------------------------ --------------------------------
Period
From October 7, Period Year
Year Ended 1996 Through From January 1, Ended
December 31, December 31, 1996 Through December 31,
1997 1996 October 6, 1996 1995
----------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Gaming (Note 3) ...................................... $ 261,439 $ 50,460 $ 197,878 $ 276,789
Rooms ................................................ 19,055 3,958 14,959 20,052
Food and beverage .................................... 37,139 7,566 27,692 33,545
Other ................................................ 11,161 1,706 7,085 9,130
--------- --------- --------- ---------
Gross revenues ................................... 328,794 63,690 247,614 339,516
Less-Promotional allowances (Note 3) ................... 44,118 8,944 32,887 37,288
--------- --------- --------- ---------
Net revenues ......................................... 284,676 54,746 214,727 302,228
--------- --------- --------- ---------
COST AND EXPENSES (Notes 2, 6, 7 and 8)
Gaming ............................................... 170,634 33,741 130,932 167,080
Rooms ................................................ 2,833 781 2,303 4,451
Food and beverage .................................... 9,882 2,257 8,415 13,516
General and administrative ........................... 62,722 15,615 53,788 68,181
Depreciation and amortization ........................ 17,089 4,819 12,253 14,639
--------- --------- --------- ---------
Total costs and expenses ......................... 263,160 57,213 207,691 267,867
--------- --------- --------- ---------
Income (loss) from operations ........................ 21,516 (2,467) 7,036 34,361
OTHER INCOME (Note 10) ................................. -- -- 3,000 --
INTEREST INCOME ........................................ 452 217 386 504
INTEREST EXPENSE (Notes 4 and 5) ....................... (49,892) (11,553) (36,949) (46,017)
--------- --------- --------- ---------
Net loss ............................................. $ (27,924) $ (13,803) $ (26,527) $ (11,152)
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-5
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands)
(Note 2)
<TABLE>
<CAPTION>
Contributed Accumulated
Capital Deficit Total
--------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1994 (Predecessor) ............................ $ 73,395 $ (56,430) $ 16,965
Net loss ............................................................ -- (11,152) (11,152)
--------- --------- ---------
Balance at December 31, 1995 (Predecessor) ............................ 73,395 (67,582) 5,813
Net loss for the period from January 1, 1996 through
October 6, 1996 ................................................... -- (26,527) (26,527)
--------- --------- ---------
Balance at October 6, 1996 (Predecessor) .............................. 73,395 (94,109) (20,714)
Capital contributed by THCR Holdings ................................ 5,000 -- 5,000
Adjustment to reflect acquisition of the Partnership
by THCR Holdings .................................................. 102,000 94,109 196,109
Net loss for the period from October 7, 1996 through
December 31, 1996 ................................................. -- (13,803) (13,803)
--------- --------- ---------
Balance at December 31, 1996 (Successor) .............................. 180,395 (13,803) 166,592
Reclassification of 1996 capital contributed by THCR
Holdings to debt .................................................. (5,000) -- (5,000)
Net loss ............................................................ -- (27,924) (27,924)
--------- --------- ---------
Balance at December 31, 1997 (Successor) .............................. $ 175,395 $ (41,727) $ 133,668
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-6
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Note 2)
<TABLE>
<CAPTION>
Successor Predecessor
----------------------------- -----------------------------
Period
From October 7, Period Year
Year Ended 1996 Through From January 1, Ended
December 31, December 31, 1996 Through December 31,
1997 1996 October 6, 1996 1995
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ................................................. $(27,924) $(13,803) $(26,527) $(11,152)
Adjustments to reconcile net loss to net cash
flows provided by (used in) operating
activities--
Noncash charges--
Depreciation and amortization .......................... 17,089 4,819 12,253 14,639
Issuance of debt in exchange for accrued
interest ............................................. 10,156 4,589 4,292 7,766
Accretion of bond discount ............................. 3,213 681 2,061 2,372
Provision for losses on receivables .................... 1,450 63 1,340 1,370
Amortization of CRDA tax credits ....................... 33 258 305 720
Valuation allowance-CRDA investments ................... 1,368 100 710 936
(Increase) decrease in receivables ..................... (1,782) 1,626 (1,290) (3,486)
(Increase) decrease in inventories ..................... (1,792) 147 122 223
(Increase) decrease in other current assets ............ (153) 707 2,131 (2,800)
(Increase) decrease in other assets .................... (1,254) 935 182 (86)
Increase in due to affiliates .......................... 19,557 1,136 576 --
(Decrease) increase in current liabilities ............. (5,781) (4,801) 7,050 2,527
(Decrease) increase in other liabilities ............... (174) (3,647) 2,419 36
-------- -------- -------- --------
Net cash flows provided by (used in)
operating activities ............................. 14,006 (7,190) 5,624 13,065
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net ................. (5,972) (362) (4,235) (6,874)
Purchases of CRDA investments ............................ (3,273) (397) (2,143) (2,805)
-------- -------- -------- --------
Net cash flows used in investing
activities ....................................... (9,245) (759) (6,378) (9,679)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of other borrowings ............................ (6,069) (1,044) (2,649) (1,470)
Other borrowings ......................................... 400 -- 1,738 --
Capital contribution ..................................... -- 5,000 -- --
-------- -------- -------- --------
Net cash flows (used in) provided by
financing activities ............................. (5,669) 3,956 (911) (1,470)
-------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents ...................................... (908) (3,993) (1,665) 1,916
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ...................................... 15,380 19,373 21,038 19,122
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD ................................................ $ 14,472 $ 15,380 $ 19,373 $ 21,038
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-7
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Operations
The accompanying consolidated financial statements include those of Trump's
Castle Associates, L.P., a New Jersey limited partnership (the "Partnership")
and its wholly owned subsidiary, Trump's Castle Funding, Inc., a New Jersey
corporation ("Funding"). All significant intercompany balances and transactions
have been eliminated in the consolidated financial statements.
The Partnership operates Trump's Castle Casino Resort, a luxury casino
hotel located in the Marina District of Atlantic City, New Jersey. During the
second quarter of 1997, the Partnership rethemed the property with a nautical
emphasis and renamed it Trump Marina Hotel Casino ("Trump Marina"). The primary
portion of Trump Marina's revenues are derived from its gaming operations.
Competition in the Atlantic City gaming market is intense and the Partnership
believes that the competition will continue due to expansion by existing
operators and as new entrants to the gaming industry become operational.
Prior to the Acquisition of the Partnership by Trump Hotels & Casino
Resorts Holdings, L.P. ("THCR Holdings") (Note 2), Donald J. Trump ("Trump") was
the beneficial owner of 100% of the common equity interest in the Partnership,
subject to the right of holders of warrants for 50% of the common stock of
Trump's Castle Hotel & Casino, Inc. ("TCHI") (the "TCHI Warrants") to acquire an
indirect beneficial interest in 0.5% of the common equity interest in the
Partnership.
Funding was formed solely to serve as a financing company to raise funds
through the issuance of bonds to the public (Note 4). Since Funding has no
business operations, its ability to repay the principal and interest on the 11
1/2% Senior Notes due 2000 (the "Senior Notes"), the 11 3/4% Mortgage Notes due
2003 (the "Mortgage Notes") and the Increasing Rate Subordinated Pay-In-Kind
Notes due 2005 (the "PIK Notes") is completely dependent upon the operations of
the Partnership.
On October 7, 1996, THCR Holdings acquired from Trump all of the
outstanding equity of the Partnership (Note 2). THCR Holdings is currently a
61.8% owned subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR").
(2) Acquisition of the Partnership and Basis of Presentation
Pursuant to the terms of the Agreement dated as of June 24, 1996, as
amended (the "Agreement") between THCR Holdings and entities owned by Trump,
THCR Holdings acquired on October 7, 1996, all of the outstanding equity
interest of the Partnership (the "Acquisition"). The Acquisition has been
accounted for as a purchase. For his equity interest in the Partnership, Trump
received a 15.33863% limited partnership interest in THCR Holdings valued at
$168,126,000, which is exchangeable into 5,837,700 shares of Common Stock of
THCR, par value $.01 per share (the "THCR Common Stock") (valuing each share at
$28.80 based on the price of the THCR Common Stock several days before and after
the date of the Agreement). The excess of the purchase price over the fair value
of the net assets acquired of $196,109,000 (including transaction costs, the
purchase of the outstanding TCHI warrants and the historical negative book value
of the Partnership of $20,714,000) has been recorded on the books of the
Partnership and has been allocated to property, plant and equipment based upon
an appraisal.
As a result of the Acquisition, a new basis of accounting was established
and financial statements prior to October 7, 1996 are presented as Predecessor
financial statements. The financial statements from October 7, 1996 are
presented as Successor financial statements.
The following unaudited pro forma information has been prepared assuming
the acquisition had occurred as of January 1, 1995. The pro forma information is
presented for informational purposes only and is not necessarily indicative of
what would have occurred if the acquisition had been made on January 1, 1995. In
addition, the pro forma information is not intended to be a projection of future
results.
F-8
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Period from
January 1, 1996
through Year Ended
October 6, 1996 December 31, 1995
(unaudited) (unaudited)
---------------- -----------------
Net Revenues ....................... $ 214,727,000 $ 302,228,000
============= =============
Income from Operations ............. $ 3,005,000 $ 29,103,000
============= =============
Net Loss ........................... $ (30,558,000) $ (16,410,000)
============= =============
(3) Accounting Policies
Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires the Partnership to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
Revenue Recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related services are performed.
The Partnership provides an allowance for doubtful accounts arising from
casino, hotel and other services, which is based upon a specific review of
certain outstanding receivables and historical collection performance. In
determining the amount of the allowance, the Partnership is required to make
certain estimates and assumptions and actual results may differ from these
estimates and assumptions.
Promotional Allowances
Gross revenues include the retail value of the complimentary food, beverage
and hotel services provided to patrons. The retail value of these promotional
allowances is deducted from gross revenues to arrive at net revenues. The cost
of such complementaries have been included in gaming costs and expenses in the
accompanying consolidated statements of operations and consist of:
<TABLE>
<CAPTION>
Successor Predecessor
------------------------------------- -----------------------------------
Period from Period from
October 7, 1996 January 1, 1996
Year Ended through through Year Ended
December 31, 1997 December 31, 1996 October 6, 1996 December 31, 1995
----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Rooms ........... $11,257,000 $ 2,434,000 $ 8,862,000 $10,998,000
Food and Beverage 22,645,000 5,085,000 17,311,000 18,981,000
Other ........... 5,618,000 743,000 2,574,000 2,483,000
----------- ----------- ----------- -----------
$39,520,000 $ 8,262,000 $28,747,000 $32,462,000
=========== =========== =========== ===========
</TABLE>
Income Taxes
The accompanying consolidated financial statements do not include a
provision for federal income taxes of the Partnership, since any income or
losses allocated to the partners are reportable for federal income tax purposes
by the partners.
Under the New Jersey Casino Control Act (the "Casino Control Act") and the
regulations promulgated thereunder, the Partnership and Funding are required to
file a consolidated New Jersey corporation business tax return.
F-9
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997, the Partnership had New Jersey state net operating
loss carryforwards of approximately $171,600,000, which are available to offset
taxable income through the year 2004. The net operating loss carryforwards
result in a deferred tax asset of $15,400,000, which has been offset by a
valuation allowance of $15,400,000, as utilization of such carryforwards is not
considered to be more likely than not.
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(first-in, first-out basis) or market.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of the assets. During the
second quarter of 1997, the Partnership revised its estimates of the useful
lives of buildings, building improvements and furniture and fixtures which were
acquired in 1996. Buildings and building improvements were reevaluated to have a
forty year life (previously thirty year)and furniture and fixtures were
determined to have a five to seven year life (previously three and eight year).
The Partnership believes these changes more appropriately reflect the timing of
the economic benefits to be received from these assets during their estimated
useful lives. During 1997, the net effect of applying these new lives was to
decrease the net loss by $4,226,000.
Long-Lived Assets
The provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets" requires, among other
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. As a result of its
review, the Partnership does not believe that any such change has occurred.
Statements of Cash Flows
For purposes of the statements of cash flows, Funding and the Partnership
consider all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Supplemental disclosures relating to the statements of cash flows are as
follows:
<TABLE>
<CAPTION>
Successor Predecessor
------------------------------------- -----------------------------------
Period from Period from
October 7, 1996 January 1, 1996
Year Ended through through Year Ended
December 31, 1997 December 31, 1996 October 6, 1996 December 31, 1995
----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Cash paid during the period
for interest ............ $36,192,000 $18,278,000 $18,209,000 $35,338,000
=========== =========== =========== ===========
</TABLE>
The acquisition of the Partnership in 1996 by THCR Holdings resulted in an
increase of $196,109,000 to the carrying value of property, plant and equipment,
an increase to contributed capital of $102,000,000 and an elimination of the
accumulated deficit of $94,109,000. In 1997, $5,000,000 of capital contributed
by THCR Holdings in 1996 was reclassified as debt.
Reclassifications
Certain reclassifications have been made to the prior period financial
statements in order to conform to the 1997 presentation.
F-10
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Mortgage Notes and PIK Notes
The Mortgage Notes bear interest at 11 3/4%, payable in cash semi-annually
on each May 15 and November 15, and mature on November 15, 2003. The Mortgage
Notes may be redeemed at Funding's option at a rate of 105 7/8 of the principal
amount commencing on December 31, 1998, and declines gradually thereafter.
The PIK Notes bear interest at 13 7/8% payable at Funding's option in
whole or in part in cash and through the issuance of additional PIK Notes
through November 15, 2003. After November 15, 2003, interest on the PIK Notes is
payable in cash at the rate of 13 7/8%. The PIK Notes mature on November 15,
2005. The PIK Notes may be redeemed at Funding's option at 100% of the principal
amount under certain conditions, as defined in the PIK Note Indenture, and a
specified percentage from the proceeds are required to be redeemed from any
equity offering of the Partnership. Interest has been accrued using the
effective interest method. Interest payments of $10,156,000 and $8,881,000 in
1997 and 1996, respectively, were satisfied by the issuance of additional PIK
Notes. The Partnership anticipates that interest due in 1998 will be satisfied
through the issuance of additional PIK Notes.
On June 23, 1995, the Partnership entered into an Option Agreement with
Hamilton Partners, L.P. ("Hamilton") which granted the Partnership an option
(the "Option") to acquire the PIK Notes owned by Hamilton. The Option was
granted to the Partnership in consideration of $1,900,000 of aggregate payments
to Hamilton. The Option was exercisable at a price equal to 60% of the aggregate
principal amount of the PIK Notes delivered by Hamilton, with accrued but unpaid
interest, plus 100% of the PIK Notes issued to Hamilton as interest subsequent
to June 23, 1995. Pursuant to the terms of the Option Agreement, upon the
occurrence of certain events within 18 months of the time the Option is
exercised, the Partnership is required to make an additional payment to Hamilton
of up to 40% of the principal amount of the PIK Notes. On May 21, 1996, the
Partnership assigned the Option to THCR Holdings, which, on that same date,
exercised the Option and acquired approximately 90% of the PIK Notes for
approximately $38,700,000 in exchange for which THCR Holdings received an
aggregate of approximately $59,300,000 of PIK Notes.
The terms of both the Mortgage Notes and PIK Notes include limitations on
the amount of additional indebtedness the Partnership may incur, distributions,
investments and other business activities of the Partnership.
The Mortgage Notes are secured by a promissory note of Partnership to
Funding (the "Partnership Note") in an amount and with payment terms necessary
to service the Mortgage Notes. The Partnership Note is secured by a mortgage on
Trump Marina and substantially all of the other assets of the Partnership. The
Partnership Note has been assigned by Funding to the Trustee to secure the
repayment of the Mortgage Notes. In addition, the Partnership has guaranteed
(the "Guaranty") the payment of the Mortgage Notes, which Guaranty is secured by
a mortgage on Trump Marina. The Partnership Note and the Guaranty are expressly
subordinated to the indebtedness described in Note 5 (the "Senior Indebtedness")
and the liens of the mortgages securing the Partnership Note and the Guaranty
are subordinate to the liens securing the Senior Indebtedness.
The PIK Notes are secured by a subordinated promissory note of the
Partnership to Funding (the "Subordinated Partnership Note"), which has been
assigned to the Trustee for the PIK Notes, and the Partnership has issued a
subordinated guaranty (the "Subordinated Guaranty") of the PIK Notes. The
Subordinated Partnership Note and the Subordinated Guaranty are expressly
subordinated to the Senior Indebtedness, the Partnership Note and the Guaranty.
The ability of Funding and the Partnership to pay their indebtedness when
due will depend on the ability of the Partnership to either generate cash from
operations sufficient for such purposes or to refinance such indebtedness on or
before the date on which it becomes due. Cash flow from operations may not be
sufficient to repay a substantial portion of the principal amount of their long
term debt at maturity. The future operating performance of the Partnership and
the ability to refinance this debt will be subject to the then prevailing
economic conditions, industry conditions and numerous other financial, business
and other factors, many of which are beyond the control of Funding or the
Partnership. There can be no assurance that the future operating performance of
the Partnership will be sufficient to meet these repayment obligations or that
the general state of the economy, the status of the capital markets or the
receptiveness of the capital markets to the gaming industry will be conducive to
refinancing this debt or other attempts to raise capital.
F-11
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Other Borrowings
Bank Borrowings
The Partnership has a term loan with a bank (the "Term Loan") with a
balance of $32,933,000 at December 31, 1997. The Term Loan has a maturity date
of May 28, 2000 and bears interest at the prime rate plus 3%, which was 11 1/2%
at December 31, 1997, but in no event can be less than 9% per annum. The
outstanding principal amount of the Term Loan is being repaid at $158,000 per
month through the maturity date, at which time the balance of $28,500,000 is
due.
The Term Loan is secured by a mortgage lien on Trump Marina that is prior
to the lien securing the Mortgage Notes (Note 4) and the Senior Notes described
below.
Senior Notes
On December 28, 1993, Funding issued $27,000,000 of Senior Notes. Similar
to the Mortgage Notes, the Senior Notes are secured by an assignment of a
promissory note of the Partnership (the "Senior Partnership Note") which is in
turn secured by a mortgage on Trump Marina and substantially all of the other
assets of the Partnership. In addition, the Partnership has guaranteed (the
"Senior Guaranty") the payment of the Senior Notes, which Senior Guaranty is
secured by a mortgage on Trump Marina. The Senior Partnership Note and the
Senior Guaranty are subordinated to the Term Loan described above.
Interest on the Senior Notes is payable semiannually on each May 15 and
November 15 at the rate of 11 1/2%. The Senior Notes mature on November 15,
2000, and are subject to a sinking fund which requires the retirement of 15% of
the Senior Notes on each May 31, 1998 and 1999. The Partnership is currently in
negotiations regarding the refinancing of the Senior Notes.
Capital Lease Obligations
Included in current maturities of long term debt are capital lease
obligations totaling $2,004,000 and $1,814,000 at December 31, 1997 and 1996,
respectively. Additionally, included in other borrowings are long term capital
lease obligations of $1,690,000 and $3,350,000 at December 31, 1997 and 1996,
respectively.
(6) Related Party Transactions
Trump Management Fee
The Partnership has a Services Agreement (the "Services Agreement") with
Trump Casino II, Inc. ("TCI-II"), a corporation wholly-owned by Trump. Pursuant
to the terms of the Services Agreement, TCI-II is obligated to provide the
Partnership, from time to time, when reasonably requested, consulting services
on a non-exclusive basis, relating to marketing, advertising, promotional and
other similar and related services with respect to the business and operations
of the Partnership, including such other services as the Managing Partner may
reasonably request.
Pursuant to the Services Agreement, the Partnership is required to pay an
annual fee in the amount of $1,500,000 to TCI-II for each year in which Earnings
Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined,
exceeds certain levels. In addition, TCI-II is to receive an incentive fee equal
to 10% of the excess EBITDA over $45,000,000 for such fiscal year.
For the year ended December 31, 1997, the period from October 7, 1996
through December 31, 1996 and the period from January 1, 1996 through October 6,
1996, the Partnership incurred no fees and expenses under the Services
Agreement. For the year ended December 31, 1995 the Partnership incurred fees
and expenses of $2,087,000 under the Services Agreement. As the Partnership did
not meet the required level of EBITDA during 1996, the monthly advances to
TCI-II related to the Services Agreement were suspended and, at December 31,
F-12
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1996, the Partnership recorded a receivable in the amount of $1,250,000, which
represents the amounts advanced during the year. The Partnership made no monthly
advances to TCI-II related to the Services Agreement during 1997. The Services
Agreement expires on December 31, 2005.
Transactions with Affiliates
At December 31, 1997 and 1996 amounts due to affiliates were $23,949,000
and $1,712,000, respectively. The Partnership has engaged in limited
intercompany transactions with Trump Plaza Associates ("Plaza Associates"),
Trump Taj Mahal Associates ("Taj Associates") and the Trump Organization, which
are affiliates of Trump. These transactions include certain shared payroll costs
as well as complimentary services offered to customers, for which the
Partnership makes initial payments and is then reimbursed by the affiliates.
For the year ended December 31, 1997, the period from October 7, 1996
through December 31, 1996, the period from January 1, 1996 through October 6,
1996 and the year ended December 31, 1995, the Partnership incurred expenses of
approximately $102,000, $176,000, $978,000 and $1,673,000, respectively, for
corporate salaries and $653,000, $78,000, $495,000 and $1,109,000, respectively,
of other transactions on behalf of these affiliates. In addition, the
Partnership received payments totaling $0, $0, $1,421,000 and $1,401,000,
respectively, for services rendered and had $5,129,000, $1,537,000, $1,665,000
and $580,000, respectively, of charges for similar costs incurred by these
related entities on behalf of the Partnership.
In 1997 the Partnership reclassified $5,000,000 of contributed capital in
1996 by THCR Holdings into a note payable. The note bears interest at the prime
rate plus 1%, which was 9 1/2% at December 31, 1997. During June 1997, the
Partnership repaid $2,000,000 plus accrued interest on this note.
Partnership Agreement
Under the terms of the Partnership Agreement, the Partnership is required
to pay all costs incurred by TCI-II. For the year ended December 31, 1997, the
period from October 7, 1996 through December 31, 1996, the period from January
1, 1996 through October 6, 1996 and the year ended December 31, 1995, the
Partnership paid $0, $72,000, $1,572,000 and $1,248,000, respectively, of
expenses on behalf of TCI-II which were charged to general and administrative
expense in the accompanying consolidated financial statements.
Trump Casino Services
Trump Casino Services, L.L.C. ("TCS"), a wholly owned subsidiary of THCR
Holdings, a New Jersey limited liability company, was founded on June 27, 1996
for the purpose of realizing cost savings and operational synergies by
consolidating certain administrative functions of, and providing certain
services to Plaza Associates, Taj Associates and the Partnership. Charges from
TCS for the year ended December 31, 1997 and for the period October 7, 1996 to
December 31, 1996 were $4,951,000 and $1,369,000, respectively.
(7) Commitments and Contingencies
Casino License Renewal
The Partnership is subject to regulation and licensing by the New Jersey
Casino Control Commission (the "CCC"). The Partnership's casino license must be
renewed periodically, is not transferable, is dependent upon the financial
stability of the Partnership, and can be revoked at any time. Due to the
uncertainty of any license renewal application, there can be no assurance that
the license will be renewed. Upon revocation, suspension for more than 120 days,
or failure to renew the casino license due to the Partnership's financial
condition or for any other reason, the Casino Control Act provides that the CCC
may appoint a conservator to take possession of and title to the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
On June 22, 1995, the CCC renewed the casino license of the Partnership
through 1999, subject to certain continuing reporting and compliance conditions.
F-13
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Self Insurance Reserves
Self insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workers compensation and other legal
proceedings in the normal course of business. These reserves are established by
the Partnership based upon a specific review of open claims as of the balance
sheet date as well as historical claims settlement experience. The costs of the
ultimate disposition of these claims may differ from these reserve amounts.
Employment Agreement
The Partnership has entered into employment agreements with certain key
employees which expire at various dates through February 2, 2000. Total minimum
commitments on these agreements at December 31, 1997 were approximately
$2,375,000.
Legal Proceedings
The Partnership is involved in legal proceedings incurred in the normal
course of business. In the opinion of management and its counsel, if adversely
decided, none of these proceedings would have a material effect on the
consolidated financial position of the Partnership.
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Casino Control Act, the Partnership must
either obtain investment taxcredits, as defined in the Casino Control Act, in an
amount equivalent to 1 1/4% of its gross casino revenues, as defined in the
Casino Control Act, or pay an alternative tax of 2 1/2% of its gross casino
revenues. Investment tax credits may be obtained by making qualified
investments, as defined, or by depositing funds which may be converted to bonds
by the Casino Reinvestment Development Authority (the "CRDA"), both of which
bear interest at below market interest rates. The Partnership is required to
make quarterly deposits with the CRDA to satisfy its investment obligations.
From time to time the Partnership has elected to donate funds that it has
on deposit with the CRDA in return for tax credits to satisfy substantial
portions of the Partnership's future investment alternative tax obligations.
Donations in the amount of $65,000 and $375,000 were made in 1997 and 1995,
respectively. No donations were made in 1996. These donations, net of the tax
credits received, were charged against operations and resulted in CRDA tax
credits of $33,000 and $191,000 to be applied to the years ending December 31,
1997 and 1995, respectively. For the year ended December 31, 1997, the period
from October 7, 1996 through December 31, 1996, the period from January 1, 1996
through October 6, 1996 and the year ended December 31, 1995, the Partnership
charged to operations $33,000, $258,000, $305,000 and $720,000, respectively,
which represents amortization of a portion of the tax credits discussed above.
In addition, for the year ended December 31, 1997, the period from October
7, 1996 through December 31, 1996, the period from January 1, 1996 through
October 6, 1996 and the year ended December 31, 1995, the Partnership charged to
operations $1,368,000, $100,000, $710,000 and $936,000, respectively, to give
effect to the below market interest rates of associated CRDA deposits and bonds.
(8) Employee Benefit Plans
The Partnership has a retirement savings plan for its nonunion employees
under Section 401(k) of the Internal Revenue Code. Employees are eligible to
contribute up to 15% of their earnings to the plan up to the maximum amount
permitted by law, and the Partnership will match 50% of an eligible employee's
contributions up to a maximum of 6% of the employee's earnings. The Partnership
recorded charges of approximately $937,000, $212,000, $765,000 and $1,013,000
for matching contributions for the year ended December 31, 1997, the period from
October 7, 1996 through December 31, 1996, the period from January 1, 1996
through October 6, 1996 and the year ended December 31, 1995, respectively.
F-14
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Partnership makes payments to various trusteed multi-employer pension
plans under industry-wide union agreements. The payments are based on the hours
worked by or gross wages paid to covered employees. It is not practical to
determine the amount of payments ultimately used to fund pension benefit plans
or the current financial condition of the plans. Under the Employee Retirement
Income Security Act, the Partnership may be liable for its share of the plans'
unfunded liabilities, if any, if the plans are terminated or if the Partnership
withdraws from participation in such plans. Based upon 1996 information the most
recent information available, the withdrawal liability to the Partnership
related to the most significant plans' unfunded status approximates $1,600,000.
Pension expense charged to operations for the year ended December 31, 1997, the
period from October 7, 1996 through December 31, 1996, the period from January
1, 1996 through October 6, 1996 and the year ended December 31, 1995, were
$547,000, $109,000, $389,000 and $497,000, respectively.
The Partnership provides no other material post employment benefits.
(9) Fair Value of Financial Instruments
The carrying amount of the following financial instruments of the
Partnership and Funding approximate fair value, as follows: (a) cash and cash
equivalents and accrued interest receivables and payables based on the
short-term nature of the financial instruments, (b) CRDA bonds and deposits
based on the allowances to give effect to the below market interest rates.
The fair values of the Mortgage Notes and PIK Notes are based on quoted
market prices as follows:
December 31, 1997
----------------------------------
Carrying Fair
Amount Value
----------- ------------
11 3/4% Mortgage Notes ............... $211,971,000 $225,191,000
PIK Notes ............................ $ 73,699,000 $ 75,233,000
December 31, 1996
----------------------------------
Carrying Fair
Amount Value
----------- ------------
11 3/4% Mortgage Notes ............... $209,070,000 $213,084,000
PIK Notes ............................ $ 63,231,000 $ 65,169,000
There are no quoted market prices for the Partnership's Term Loan and
Senior Notes. A reasonable estimate of their value could not be made without
incurring excessive costs.
(10) License Revenue
During 1996, the Partnership entered into an agreement with Atlantic
Thermal Systems, Inc. ("Atlantic Thermal") pursuant to which Atlantic Thermal
was granted an exclusive license to use, operate and maintain certain steam and
chilled water production facilities located at Trump Marina. In consideration of
the license, Atlantic Thermal paid the Partnership a $3,000,000 non-refundable
license fee. This amount has been included in other non-operating income in the
accompanying consolidated financial statements.
F-15
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(11) Financial Information of Funding
Financial information relating to Funding is as follows:
<TABLE>
<CAPTION>
Successor Predecessor
--------------------------------------- -----------
December 31, 1997 December 31, 1996
<S> <C> <C> <C>
Total Assets (including Mortgage Notes Receivable
of $242,141,000, net of unamortized discount of
$30,170,000 and $33,071,000 at December 31, 1997
and 1996, PIK Notes Receivable of $80,896,000, net
of unamortized discount of $7,197,000 at December
31, 1997 and $70,740,000 net of unamortized
discount of $7,509,000 at December 31, 1996 and
Senior Notes Receivable of $27,000,000 at December
31, 1997 and 1996) $312,670,000 $299,301,000
============ ============
Total Liabilities and Capital (including Mortgage
Notes Payable of $242,141,000, net of unamortized
discount of $30,170,000 and $33,071,000 at December
31, 1997 and 1996, PIK Notes Payable of
$80,896,000, net of unamortized discount of
$7,197,000 at December 31, 1997 and $70,740,000 net
of unamortized discount of $7,509,000 at December
31, 1996 and Senior Notes Payable of $27,000,000 at
December 31, 1997 and 1996) $312,670,000 $299,301,000
============ ============
<CAPTION>
Period From Period From
October 7, 1996 January 1, 1996
Year Ended Through through
December 31, 1997 December 31, 1996 October 6, 1996
----------------- ----------------- ---------------
<S> <C> <C> <C>
Interest Income ..................................... $ 44,961,000 $ 10,250,000 $32,945,000
Interest Expense .................................... 44,961,000 10,250,000 32,945,000
------------ ------------ -----------
Net Income $ -- $ -- $ --
============ ============ ===========
</TABLE>
F-16
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 19,148 $ 14,472
Receivables, net ..................................................... 8,704 8,028
Inventories .......................................................... 2,905 3,090
Other current assets ................................................. 2,367 1,713
-------- --------
Total current assets ............................................. 33,124 27,303
PROPERTY AND EQUIPMENT, NET ............................................ 492,462 499,513
OTHER ASSETS ........................................................... 16,489 14,590
-------- --------
Total assets ..................................................... $542,075 $541,406
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities-other borrowings .................................. $ 1,963 $ 7,954
Accounts payable and accrued expenses ................................ 28,871 25,742
Due to affiliates .................................................... 21,100 23,949
Accrued interest payable ............................................. 5,044 4,020
-------- --------
Total current liabilities ........................................ 56,978 61,665
MORTGAGE NOTES
(Net of unamortized discount of $28,551 and
$30,170, respectively) ............................................. 213,590 211,971
PIK NOTES
(Net of unamortized discount of $7,012 and $7,197,
respectively) ...................................................... 79,496 73,699
OTHER BORROWINGS ....................................................... 67,801 55,673
OTHER LONG TERM LIABILITIES ............................................ 3,540 4,730
-------- --------
Total liabilities ................................................ 421,405 407,738
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL ...................................................... 120,670 133,668
-------- --------
Total liabilities and capital .................................... $542,075 $541,406
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-17
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C>
REVENUES:
Gaming ...................... $ 61,163 $ 68,545 $ 123,776 $ 132,519
Rooms ....................... 3,904 4,842 7,461 8,779
Food and beverage ........... 8,047 8,613 15,541 16,532
Other ....................... 2,713 3,162 4,598 5,368
--------- --------- --------- ---------
Gross revenues ............ 75,827 85,162 151,376 163,198
Less-promotional allowances ... 8,986 10,123 17,932 19,735
--------- --------- --------- ---------
Net revenues ................ 66,841 75,039 133,444 143,463
--------- --------- --------- ---------
COSTS AND EXPENSES:
Gaming ...................... 38,727 44,449 78,604 85,483
Rooms ....................... 931 691 1,599 1,299
Food and beverage ........... 2,522 2,497 4,354 4,620
General and administrative .. 13,682 16,049 28,691 32,222
Depreciation and amortization 4,148 3,684 8,198 8,725
--------- --------- --------- ---------
Total costs and expenses .... 60,010 67,370 121,446 132,349
--------- --------- --------- ---------
Income from operations .... 6,831 7,669 11,998 11,114
INTEREST INCOME ............... 153 91 381 160
INTEREST EXPENSE .............. (12,762) (12,330) (25,377) (24,528)
--------- --------- --------- ---------
Net loss .................... $ (5,778) $ (4,570) $ (12,998) $ (13,254)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-18
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(unaudited)
(in thousands)
Partners' Partners'
Capital Deficit Total
--------- --------- ---------
Balance at December 31, 1997 ....... $ 175,395 $ (41,727) $ 133,668
Net loss ........................... -- (12,998) (12,998)
--------- --------- ---------
Balance at June 30, 1998 ........... $ 175,395 $ (54,725) $ 120,670
========= ========= =========
The accompanying notes are an integral part of this condensed consolidated
statement.
F-19
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1998 1997
-------- --------
(unaudited)
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................... $(12,998) $(13,254)
Adjustments to reconcile net loss to net cash flows provided
by operating activities--
Noncash charges--
Depreciation and amortization ........................ 8,198 8,725
Accretion of bond discount ........................... 1,804 1,543
Issuance of debt in exchange for accrued interest .... 5,612 4,908
Provision for losses on receivables .................. 536 744
Valuation allowance--CRDA investments ................ 528 576
Increase in receivables .............................. (1,212) (2,347)
Decrease (increase) in inventories ................... 185 (1,270)
Increase in other current assets ..................... (614) (1,369)
Increase in other assets ............................. (888) (3,412)
Increase in current liabilities ...................... 4,153 3,248
(Decrease) increase in amounts due to affiliates ..... (321) 10,125
Decrease in other liabilities ........................ (1,190) (75)
-------- --------
Net cash flows provided by operating activities .. 3,793 8,142
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net ................... (1,147) (1,397)
Purchase of CRDA investments ............................... (1,539) (1,672)
-------- --------
Net cash flows used in investing activities ...... (2,686) (3,069)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable to affiliate ..................... (2,550) (2,000)
Repayment of other borrowings .............................. (60,881) (2,120)
Proceeds of other borrowings ............................... 67,000 --
-------- --------
Net cash flows provided by (used in)
financing activities ........................... 3,569 (4,120)
-------- --------
Net increase in cash and cash equivalents ........ 4,676 953
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............. 14,472 15,380
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................... $ 19,148 $ 16,333
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ..................................... $ 16,874 $ 18,025
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-20
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Operations
The accompanying condensed consolidated financial statements include those
of Trump's Castle Associates, L.P., a New Jersey limited partnership (the
"Partnership"), and its wholly owned subsidiary, Trump's Castle Funding, Inc., a
New Jersey corporation ("Funding"). The Partnership is wholly owned by Trump
Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"). THCR Holdings is currently a 63.4% owned subsidiary of Trump Hotels
& Casino Resorts, Inc. ("THCR").
All significant intercompany balances and transactions have been eliminated
in the condensed consolidated financial statements.
The Partnership operates Trump Marina Hotel Casino ("Trump Marina"), a
luxury casino hotel located in the Marina District of Atlantic City, New Jersey.
The primary portion of Trump Marina's revenues are derived from its gaming
operations. Competition in the Atlantic City gaming market is intense and the
Partnership believes that the competition will continue due to expansion by
existing operators and new entrants to the gaming industry becoming operational.
Funding was incorporated solely to serve as a financing company to raise
funds through the issuance of bonds to the public. Since Funding has no business
operations, its ability to repay the principal and interest on the 10 1/4%
Senior Secured Notes due 2003 (the "New Senior Notes"), the 11 3/4% Mortgage
Notes due 2003 (the "Mortgage Notes") and its Increasing Rate Subordinated
Pay-in-Kind Notes due 2005 (the "PIK Notes") is completely dependent upon the
operations of the Partnership. (See Note 3 regarding refinancing of the Old
Senior Notes.)
The accompanying condensed consolidated financial statements have been
prepared by the Partnership without audit. In the opinion of the Partnership,
all adjustments, consisting of only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
the periods presented have been made.
The accompanying condensed consolidated financial statements have been
prepared by the Partnership pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Accordingly, certain information
and note disclosures normally included in the financial statements prepared in
conformity with generally accepted accounting principles have been omitted.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the annual report on Form 10-K for the year ended December 31, 1997
filed with the SEC by the Partnership and Funding.
Certain reclassifications have been made to conform prior year financial
information to the current year presentation.
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the three and six month periods ending June 30,
1998 are not necessarily indicative of the operating results for a full year.
(2) Property and Equipment
During the second quarter of 1997, the Partnership revised its estimates of
the useful lives of buildings, building improvements and furniture and fixtures
which were acquired in 1996. Buildings and building improvements were
reevaluated to have a forty year life and furniture and fixtures were determined
to have a five to seven year life. The Partnership believes these changes more
appropriately reflect the timing of the economic benefits to be received from
these assets during their estimated useful lives. For the six months ended June
30, 1998, the net effect of applying these new lives was to decrease the net
loss by $1,409,000. There was no effect to net loss as a result of applying
these new estimates of useful lives for the three months ended June 30, 1998.
F-21
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)
(3) Long Term Debt and Subsequent Event
On April 17, 1998, Funding refinanced its 11 1/2% Senior Secured Notes due
2000 (the "Old Senior Notes") and its term loan with a bank (the "Term Loan") by
issuing the New Senior Notes. The New Senior Notes have a priority mortgage lien
ahead of the Partnership's Mortgage Notes and are further secured by virtually
all of the Partnership's assets. The proceeds from the issuance of the New
Senior Notes were used to redeem all of the issued and outstanding Old Senior
Notes at 100% of their principal amount and to repay the Term Loan in full. In
conjunction with this refinancing, Trump's Castle Hotel & Casino Inc., a New
Jersey corporation and the general partner of the Partnership ("TCHI"), obtained
a working capital credit facility (the "Working Capital Loan"). Both the New
Senior Notes and the Working Capital Loan are guaranteed by the Partnership.
The New Senior Notes have an outstanding principal amount of $62,000,000
and bear interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The New Senior Notes mature on April 17, 2003 and are
included in Other Borrowings in the Partnership's condensed consolidated balance
sheet.
The Working Capital Loan has an outstanding principal amount of $5,000,000
and bears interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The entire principal balance of the Working Capital Loan,
which matures on April 17, 2003, is payable to TCHI and is included in Other
Borrowings on the Partnership's condensed consolidated balance sheet.
On July 8, 1998, the Partnership received a bank commitment to refinance
its Mortgage Notes, New Senior Notes and the Working Capital Loan. A tender
offer was made to existing mortgage note holders on July 9, 1998 offering $940
per $1,000 of principal amount, plus accrued interest. Consummation of the
tender offer is conditioned upon, among other things, a minimum tender of 98% of
the principal amount of the mortgage notes. The expiration of the tender offer
was extended to August 14, 1998. Although it is the Partnership's intention to
complete this transaction, no assurances can be made as to the ultimate
consummation of the refinancing, or on the terms as are currently outlined in
the existing tender offer and bank commitment.
(4) Financial Information of Funding
Financial information relating to Funding is as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable
of $242,141, net of unamortized discount of
$28,551 and $30,170 at June 30, 1998 and December
31, 1997, PIK Notes Receivable of $86,508, net of
unamortized discount of $7,012 at June 30, 1998
and $80,896, net of unamortized discount of $7,197
at December 31, 1997, New Senior Notes Receivable
of $62,000 at June 30, 1998 and Old Senior Notes
Receivable of $27,000 at December 31, 1997) .................. $355,086 $312,670
======== ========
Total Liabilities and Capital (including Mortgage
Notes Payable of $242,141, net of unamortized
discount of $28,551 and $30,170 at June 30, 1998
and December 31, 1997, PIK Notes Payable of
$86,508, net of unamortized discount of $7,012 at
June 30, 1998 and $80,896, net of unamortized
discount of $7,197 at December 31, 1997, New
Senior Notes Payable of $62,000 at June 30, 1998
and Old Senior Notes Payable of $27,000 at
December 31, 1997) ........................................... $355,086 $312,670
======== ========
<CAPTION>
Six Months
Ended June 30,
-----------------------
1998 1997
-------- --------
Interest Income ................................................ $ 23,917 $ 22,243
Interest Expense ............................................... 23,917 22,243
-------- --------
Net Income ..................................................... $ -- $ --
======== ========
</TABLE>
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Hotel & Casino, Inc.
We have audited the accompanying balance sheet of Trump's Castle Hotel &
Casino, Inc. (a New Jersey Corporation) as of March 31, 1998. This balance sheet
is the responsibility of the management of Trump's Castle Hotel & Casino, Inc.
Our responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Trump's Castle Hotel & Casino, Inc.
as of March 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
July 28, 1998
F-23
<PAGE>
TRUMP'S CASTLE HOTEL & CASINO, INC.
BALANCE SHEET
March 31, 1998
ASSETS
Total assets .................................................... $ --
======
LIABILITIES AND SHAREHOLDER'S EQUITY
COMMITMENTS AND CONTINGENCIES
Common Stock, no par value, 1,000 shares authorized,
100 shares issued and outstanding ................................. $ --
Total Shareholder's Equity .................................... --
------
Total Liabilities and Shareholder's Equity .................... $ --
======
The accompanying notes to balance sheet are an integral part of this balance
sheet.
F-24
<PAGE>
TRUMP'S CASTLE HOTEL & CASINO, INC.
NOTES TO BALANCE SHEET
March 31, 1998
(1) Organization and Operations
Trump's Castle Hotel & Casino, Inc. ("TCHI"), which is a wholly owned
subsidiary of Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"),
which in turn is a subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR"),
was incorporated in 1985 under the laws of the State of New Jersey. Trump's
Castle Associates, L.P. (the "Partnership") is owned by TCHI and THCR Holdings,
1% and 99%, respectively.
As TCHI has no operations, its ability to service its debt is dependent
upon the successful operations of the Partnership.
(2) Issuance of Senior Secured Notes
On April 17, 1998, TCHI issued and sold $5,000,000 principal amount of 10
1/4% Senior Secured Notes due 2003 (the "TCHI Offering"). Concurrent with the
TCHI Offering. Trump's Castle Funding, Inc. issued and sold $62,000,000
principal amount of 10 1/4% Senior Secured Notes due 2003 (the "Funding
Offering"). The proceeds from the TCHI Offering and the Funding Offering
(collectively the "Offerings") were immediately loaned to the Partnership at
terms which mirror the Offerings.
Existing and prospective investors should consider among other things, the
high leverage and fixed charges of the Partnership, the risk in refinancing and
repaying indebtedness and the Partnership's need for additional financing, the
restrictions imposed on certain activities by certain debt instruments, the
historical results and net losses of the Partnership. There can be no assurance
that the Partnership's operations will be successful. See "Risk Factors"
included elsewhere in this Prospectus for a discussion of these and other
factors.
F-25
<PAGE>
TRUMP'S CASTLE HOTEL & CASINO, INC.
TRUMP'S CASTLE FUNDING, INC.
TRUMP'S CASTLE ASSOCIATES, L.P.
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
U.S. BANK NATIONAL ASSOCIATION
By Facsimile:
(612) 244-1537
Attention: Melina Black
Confirm by telephone:
(612) 244-8161
By Registered or Certified Mail:
U.S. Bank National Association
180 East 5th Street
St. Paul, Minnesota 55101
Melina Black
By Hand/Overnight Courier:
U.S. Bank National Association
180 East 5th Street
St. Paul, Minnesota 55101
Melina Black
or
U.S. Bank National Association
100 Wall Street
Bond Window, 20th Floor
New York, New York 10005
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Funding's Amended and Restated Certificate of Incorporation provides for
indemnification of any present or former "corporate agent" (as defined in
N.J.S.A. 14A:3-5). Funding's Certificate of Incorporation provides that Funding
shall indemnify and reimburse any present or former corporate agent who serves
Funding, or any constituent corporation absorbed by Funding in a merger or
consolidation, or any other corporation or business entity in which Funding has
a business interest, against any reasonable and necessary expenses, counsel fees
and liabilities actually incurred by them in any civil or criminal proceeding
brought or threatened for acts arising out of their status as corporate agents,
to the maximum extent permitted by law and in accordance with the procedures set
forth in N.J.S.A. 14A:3-5. Termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that such corporate agent did not meet the
applicable standard of conduct for indemnification. Indemnity shall be paid in
advance of the final disposition of the proceeding, provided the corporate agent
undertakes to repay Funding if it shall be ultimately determined that he is not
entitled to indemnification. Funding's Certificate of Incorporation further
provides that such indemnification rights will be construed as in addition to,
and not exclusive of, all other rights to indemnification to which any corporate
agent may be entitled.
The Partnership's Amended and Restated Partnership Agreement provides for
indemnification of each Partner, its Affiliates, each Partner Representative and
his or her Affiliates and all officers, directors, employees and agents of such
Partner or Partner Representative and his, her or its affiliates (individually,
an "Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses of any nature (including
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the business of the Partnership, including without limitation
liabilities under the Federal and state securities laws, regardless of whether
the Indemnitee continues to be a Partner, an Affiliate of a Partner, a Partner
Representative or an Affiliate of a Partner Representative, or an officer,
director, employee, or agent of a Partner or Partner Representative or an
Affiliate of such Persons at the time any such liability or expense is paid or
incurred, but only if such course of conduct does not constitute gross
negligence or willful misconduct; provided, however, that such indemnification
or agreement to hold harmless shall be recoverable only out of assets of the
Partnership and not from the Partners. The indemnification provided by the
Amended and Restated Partnership Agreement is in addition to any other rights to
which an Indemnitee may be entitled under any agreement, as a matter of law or
equity, or otherwise, both as to action in the Indemnitee's capacity as a
Partner, an Affiliate of a Partner, a Partner Representative or an Affiliate of
a Partner Representative, or as an officer, director, employee or agent of a
Partner or Partner Representative or an Affiliate of such Persons and as to any
action in another capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee. No Indemnitee is
denied indemnification in whole or in part under the Amended and Restated
Partnership Agreement by reason of the fact that the Indemnitee had an interest
in the transaction with respect to which the indemnification applies if the
transaction was approved in accordance with Article 7 of the Amended and
Restated Partnership Agreement.
The Partnership and Funding have obtained Directors and Officers liability
insurance in the aggregate sum of $5 million.
N.J.S.A. 14A:3-5 grants a corporation broad power to indemnify certain
persons, including directors and officers, if they have acted in good faith and
in a manner they reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, in a derivative action, if they have not been
adjudged to be liable to the corporation (unless a court makes an exception to
this requirement), or, in a criminal proceeding, if they had no reasonable cause
to believe their conduct was unlawful. A director or officer must be indemnified
against expenses to the extent that he has been successful in the defense of a
claim. N.J.S.A. 14A:3-5 further provides that the foregoing provisions are not
exclusive of any other rights to which those seeking indemnification may be
entitled
II-1
<PAGE>
under a certificate of incorporation, bylaw, agreement, vote of shareholders or
otherwise, and grants a corporation the power to purchase and maintain insurance
for a director or officer against any expenses incurred in any proceeding and
any liabilities asserted against him by reason of his having been a director or
officer, whether or not it would have the power to indemnify him against such
expenses and liabilities under the foregoing provisions.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No.
- -----------
3(1) Amended and Restated Certificate of Incorporation of Trump's
Castle Funding, Inc.
3.1(1) Bylaws of Trump's Castle Funding, Inc.
3.2-3.6 Intentionally omitted.
3.7.1(2) Second Amended and Restated Partnership Agreement of Trump's
Castle Associates.
3.7.2(12) Amendment to the Second Amended and Restated Partnership
Agreement of Trump's Castle Associates, dated as of October 7,
1996.
3.7.3(12) Third Amended and Restated Partnership Agreement of Trump's
Castle Associates, L.P., dated as of October 7, 1996.
3.8* Restated Certificate of Incorporation of Trump's Castle Hotel &
Casino, Inc.
3.9* By-Laws of Trump's Castle Hotel & Casino, Inc.
4.1-4.10 Intentionally omitted.
4.11(2) Indenture, among Trump's Castle Funding, Inc. as issuer, Trump's
Castle Associates, as guarantor, and the Mortgage Note Trustee,
as trustee.
4.12(2) Indenture of Mortgage between Trump's Castle Associates, as
Mortgagor, and Funding, as Mortgagee.
4.13(2) Assignment Agreement between Trump's Castle Funding, Inc. and the
Mortgage Note Trustee.
4.14(2) Partnership Note of Trump's Castle Associates.
4.15 Form of Mortgage Note (included in Exhibit 4.11).
4.16 Form of Partnership Guarantee (included in Exhibit 4.11).
4.17(2) Indenture between Trump's Castle Funding, Inc., as issuer,
Trump's Castle Associates, as guarantor, and the PIK Note
Trustee, as trustee.
4.18(2) Pledge Agreement between Trump's Castle Funding, Inc. and the PIK
Note Trustee.
4.19(2) Subordinated Partnership Note.
4.20 Form of PIK Note (included in Exhibit 4.17).
4.21 Form of Subordinated Partnership Guarantee (included in Exhibit
4.17).
4.22(1) Letter Agreement between Trump's Castle Associates and the
Proposed Senior Secured Note Purchasers regarding the Senior
Secured Notes.
4.23(2) Note Purchase Agreement for 11 1/2% Series A Senior Secured Notes
of Trump's Castle Associates due 1999.
4.24(2) Indenture, among Trump's Castle Funding, Inc., as issuer, Trump's
Castle Associates, as guarantor, and the Senior Secured Note
Trustee, as trustee.
4.25(2) Indenture of Mortgage and Security Agreement between Trump's
Castle Associates, as mortgagor/debtor, and Trump's Castle
Funding, Inc. as mortgagee/secured party (Senior Note Mortgage).
II-2
<PAGE>
Exhibit No.
- -----------
4.26(2) Registration Rights Agreement by and among Trump's Castle
Associates and certain purchasers.
4.27 Intentionally omitted.
4.28(2) Guarantee Mortgage.
4.29(2) Senior Partnership Note.
4.30(2) Indenture of Mortgage and Security Agreement between Trump's
Castle Associates as mortgagor/debtor and the Senior Note Trustee
as mortgagee/secured party (Senior Guarantee Mortgage).
4.31(2) Assignment Agreement between Trump's Castle Funding, Inc., as
assignor, and the Senior Note Trustee, as assignee (Senior
Assignment Agreement).
4.32(2) Amended and Restated Nominee Agreement.
4.33(14) Note Purchase Agreement, dated as of April 17, 1998, for 10 1/4%
Series A Senior Secured Notes due 2003 of Trump's Castle Funding,
Inc. and 10 1/4% Series A Senior Secured Notes due 2003 of
Trump's Castle Hotel & Casino, Inc.
4.34(14) Indenture, dated as of April 17, 1998, by and among Trump's
Castle Hotel & Casino, Inc., as issuer, Trump's Castle
Associates, L.P., as guarantor, and U.S. Bank National
Association, as trustee.
4.35(14) Indenture, dated as of April 17, 1998, by and among Trump's
Castle Funding, Inc., as issuer, Trump's Castle Associates, L.P.,
as guarantor, and U.S. Bank National Association, as trustee.
4.36(14) Registration Rights Agreement, dated as of April 17, 1998, by and
among Trump's Castle Hotel & Casino, Inc., Trump's Castle
Associates, L.P., Trump's Castle Funding, Inc. and funds managed
by Putnam Investment Management.
4.37(14) Intercreditor Agreement, dated as of April 17, 1998, between
Trump's Castle Associates, L.P., Trump's Castle Funding, Inc.,
Trump's Castle Hotel & Casino, Inc. and U.S. Bank National
Association.
4.38(14) Indenture of Mortgage and Security Agreement, dated as of April
17, 1998, between Trump's Castle Associates, L.P., as
Mortgagor/Debtor, and Trump's Castle Funding, Inc., as
Mortgagee/Secured Party.
4.39(14) Indenture of Mortgage and Security Agreement, dated as of April
17, 1998, between Trump's Castle Associates, L.P., as
Mortgagor/Debtor, and U.S. Bank National Association, as
Mortgagee/Secured Party.
4.40(14) Senior Assignment Agreement, dated as of April 17, 1998, by
Trump's Castle Funding, Inc., as Assignor, to U.S. Bank National
Association, as Assignee.
4.41(14) Indenture of Mortgage and Security Agreement, dated as of April
17, 1998, between Trump's Castle Associates, L.P., as
Mortgagor/Debtor, and Trump's Castle Hotel & Casino, Inc., as
Mortgagee/Secured Party.
4.42(14) Indenture of Mortgage and Security Agreement, dated as of April
17, 1998, between Trump's Castle Associates, L.P., as
Mortgagor/Debtor, and U.S. Bank National Association, as
Mortgagee/Secured Party.
4.43(14) Senior TCHI Assignment Agreement, dated as of April 17, 1998, by
Trump's Castle Hotel & Casino, Inc., as Assignor, to U.S. Bank
National Association, as Assignee.
5.1* Opinion of Willkie Farr & Gallagher.
5.2* Opinion of Graham, Curtin & Sheridan.
8 Opinion of Willkie Farr & Gallagher with respect to certain tax
matters.
10.1-10.2 Intentionally omitted.
II-3
<PAGE>
Exhibit No.
- -----------
10.3(3) Employment Agreement dated January 17, 1991, between Trump's
Castle Associates and Roger P. Wagner.
10.4(4) Second Amendment to Employment Agreement dated January 17, 1991
between Trump's Castle Associates, Trump's Castle Hotel & Casino,
Inc., and Roger P. Wagner.
10.5(5) Form of License Agreement between Trump's Castle Associates and
Donald J. Trump.
10.6-10.10 Intentionally omitted.
10.11(11) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.12(6) Trump's Castle Hotel & Casino Retirement Savings Plan, effective
as of September 1, 1986.
10.13-10.18 Intentionally omitted.
10.19(3) Lease Agreement by and between State of New Jersey acting through
its Department of Environmental Protection, Division of Parks and
Forests, as Landlord, and Trump's Castle ssociates, as tenant,
dated September 1, 1990.
10.20-10.26 Intentionally omitted.
10.27(1) Services Agreement.
10.28-10.31 Intentionally omitted.
10.32(7) Employment Agreement dated December 20, 1993, between Patricia M.
Wild and Trump's Castle Associates.
10.33 Intentionally omitted.
10.34(7) Amended and Restated Credit Agreement, dated as of December 28,
1993, among Midlantic, Trump's Castle Associates and Trump's
Castle Funding, Inc.
10.35(7) Amendment No. 1 to Amended and Restated Indenture of Mortgage,
between Trump's Castle Associates, as Mortgagor and Midlantic, as
Mortgagee.
10.36(7) Amended and Restated Indenture of Mortgage, between Trump's
Castle Associates, as Mortgagor and Midlantic, as Mortgagee,
dated as of May 29, 1992.
10.37(7) Amendment No. 1 to Amended and Restated Assignment of Leases and
Rents, between Trump's Castle Associates, as assignor, and
Midlantic, as assignee.
10.38(7) Amended and Restated Assignment of Leases and Rents, between
Trump's Castle Associates, as assignor, and Midlantic, as
assignee, dated as of May 29, 1992.
10.39(7) Amendment No. 1 to Amended and Restated Assignment of Operating
Assets, between Trump's Castle Associates, as assignor and
Midlantic, as assignee.
10.40(7) Amended and Restated Assignment of Operating Assets, between
Trump's Castle Associates, as assignor, and Midlantic, as
assignee, dated as of May 29, 1992.
10.41(7) Intercreditor Agreement, by and among Midlantic, the Senior Note
Trustee, the Mortgage Note Trustee, the PIK Note Trustee, Trump's
Castle Funding, Inc. and Trump's Castle Associates.
10.42(8) Option Agreement, dated as of June 23, 1995, between Hamilton
Partners, L.P. and Trump's Castle Associates.
10.43(9) Form of Amended and Restated Term Note, dated as of May 28, 1995,
between Midlantic Bank, N.A. and Trump's Castle Associates.
10.44(11) Severance Agreement dated June 16, 1995, between Robert
E. Schaffhauser and Trump's Castle Associates.
10.45(11) Employment Agreement dated July 10, 1995, between Mark A. Brown
and Trump's Castle Associates.
II-4
<PAGE>
Exhibit No.
- -----------
10.45.1* Employment Agreement dated March 6, 1998, between Mark A. Brown
and Trump's Castle Associates, L.P.
10.46(12) Thermal Energy Service Agreement, dated as of September 27, 1996,
by and between Atlantic Jersey Thermal Systems, Inc. and Trump's
Castle Associates.
10.47(12) Amended and Restated Services Agreement, dated as of October 23,
1996, by and among Trump Plaza Associates, Trump Taj Mahal
Associates, Trump's Castle Associates, L.P. and Trump Casino
Services, L.L.C.
10.48(13) Employment Agreement between R. Bruce McKee and Trump Taj Mahal
Associates, dated August 1, 1994.
12* Computation of Ratio of Earnings to Fixed Charges.
21* List of Subsidiaries.
23.1 Independent Auditors' Consent of Arthur Andersen LLP.
23.2 Consent of Willkie Farr & Gallagher (included in their opinions
filed as Exhibit 5.1 and Exhibit 8 hereto).
23.3 Consent of Graham, Curtin & Sheridan (included in their opinion
filed as Exhibit 5.2 hereto).
24* Powers of Attorney (included on the signature page hereto).
25* Statement on Form T-1 of Eligibility of Trustee.
99.1* Form of Letter of Transmittal of Trump's Castle Hotel & Casino,
Inc.
99.2* Form of Notice of Guaranteed Delivery of Trump's Castle Hotel &
Casino, Inc.
99.3* Form of Letter to Clients of Trump's Castle Hotel & Casino, Inc.
99.4* Form of Letter to Nominees of Trump's Castle Hotel & Casino, Inc.
99.5* Form of Letter of Transmittal of Trump's Castle Funding, Inc.
99.6* Form of Notice of Guaranteed Delivery of Trump's Castle Funding,
Inc.
99.7* Form of Letter to Clients of Trump's Castle Funding, Inc.
99.8* Form of Letter to Nominees of Trump's Castle Funding, Inc.
- ------------------
* Previously filed.
(1) Incorporated herein by reference to the Exhibit to Trump's Castle Funding,
Inc. and Trump's Castle Associates' Registration Statement on Form S-4,
Registration No. 33-68038.
(2) Incorporated herein by reference to the Exhibit to Amendment No. 5 to the
Schedule 13E-3 of TC/GP, Inc. and the Partnership, File No. 5-36825, filed
with the SEC on January on January 11, 1994.
(3) Incorporated herein by reference to the Exhibit to Trump's Castle Funding,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1990.
(4) Incorporated herein by reference to the Exhibit to Trump's Castle Funding,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.
(5) Incorporated herein by reference to the Exhibit to Trump's Castle Funding,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1991.
(6) Incorporated herein by reference to the Exhibit to Trump's Castle Funding,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1986.
(7) Incorporated herein by reference to the identically numbered Exhibit to
Trump's Castle Funding, Inc.'s Registration Statement on Form S-4,
Registration Number 33-52309 filed with the SEC on February 17, 1994.
II-5
<PAGE>
(8) Incorporated herein by reference to the identically numbered Exhibit to
Trump's Castle Funding, Inc.'s and Trump Castle Associates' Current Report
on Form 8-K dated as of June 23, 1995.
(9) Incorporated herein by reference to the identically numbered Exhibit to
Trump's Castle Funding, Inc.'s and Trump's Castle Associates' Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995.
(10) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts Holdings,
L.P. and Trump Hotels & Casino Resorts Funding, Inc. for the quarter ended
June 30, 1995.
(11) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump's Castle Funding, Inc. and Trump's
Castle Associates for the year ended December 31, 1995.
(12) Incorporated herein by reference to the identically numbered Exhibit to
Trump's Castle Funding, Inc.'s and Trump Castle Associates' Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.
(13) Incorporated herein by reference to the Exhibit in the Quarterly Report on
Form 10-Q of Trump Taj Mahal Funding, Inc. for the quarter ended September
30, 1994.
(14) Incorporated herein by reference to the identically numbered Exhibit to
Trump's Castle Funding, Inc.'s and Trump Castle Associates, L.P.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial statements
or notes thereto.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Registrants
pursuant to the provisions, described under Item 20 above,or otherwise, the
Registrants have been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) ((S)
230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculatin of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by (S) 210.3-19 of this chapter at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3 ((S) 239.33
of this chapter), a post-effective amendment need not be filed to include
financial statements and information required by Section 10(a)(3) of the
Act or (S) 210.3-19 of this chapter if such financial statements and
information are contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the Form F-3.
II-6
<PAGE>
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrants have duly caused this Amendment No. 1 to Registration Statement to
be signed on their behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 11th day of September, 1998.
TRUMP'S CASTLE HOTEL & CASINO, INC.
By: /s/ NICHOLAS L. RIBIS
------------------------------------------------
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
TRUMP'S CASTLE ASSOCIATES, L.P.
By: Trump's Castle Hotel & Casino, Inc.
its General Partner
By: /s/ NICHOLAS L. RIBIS
------------------------------------------------
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
TRUMP'S CASTLE FUNDING, INC.
By: /s/ NICHOLAS L. RIBIS
------------------------------------------------
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
II-8
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
TRUMP'S CASTLE HOTEL & CASINO, INC.
TRUMP'S CASTLE ASSOCIATES, L.P.
By: Trump's Castle Hotel & Casino, Inc.
its General Partner
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of Directors September 11, 1998
- --------------------------------
(Donald J. Trump)
/s/ NICHOLAS L. RIBIS President, Chief Executive Officer September 11, 1998
- -------------------------------- and Director (principal executive
(Nicholas L. Ribis) and financial officer)
* Director September 11, 1998
- --------------------------------
(Robert M. Pickus)
* Vice President, Assistant Treasurer September 11, 1998
- -------------------------------- and Director (principal accounting
(John P. Burke) officer)
* Director September 11, 1998
- --------------------------------
(Asher O. Pacholder)
* Director September 11, 1998
- --------------------------------
(Arthur S. Bahr)
* Director September 11, 1998
- --------------------------------
(Thomas F. Leahy)
*By: /s/ NICHOLAS L. RIBIS
---------------------------------
Nicholas L. Ribis
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
TRUMP'S CASTLE FUNDING, INC..
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Sole Director September 11, 1998
- -----------------------------------
(Donald J. Trump)
/s/ NICHOLAS L. RIBIS President and Chief Executive Officer September 11, 1998
- ----------------------------------- (principal executive officer)
(Nicholas L. Ribis)
* Vice President and Secretary September 11, 1998
- ----------------------------------- (principal financial officer)
(Robert M. Pickus)
/s/ JOHN P. BURKE Vice President and Treasurer September 11, 1998
- ----------------------------------- (principal accounting officer)
(John P. Burke)
*By: /s/ NICHOLAS L. RIBIS
------------------------------
Nicholas L. Ribis
Attorney-in-Fact
</TABLE>
II-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates, L.P.
And Subsidiary:
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheets of Trump's Castle Associates, L.P. and
Subsidiary as of December 31, 1997 and 1996 and the related consolidated
statements of operations, partners' capital and cash flows for the year ending
December 31, 1997 and for the period from October 7, 1996 through December 31,
1996 (Note 2) included in this Registration Statement and have issued our report
thereon dated February 5, 1998. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The accompanying
schedule is the responsibility of the Partnership's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 5, 1998
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates, L.P.
And Subsidiary:
We have audited, in accordance with generally accepted auditing standards,
the consolidated statements of operations, partners' capital and cash flows for
the period from January 1, 1996 through October 6, 1996 and for the year ended
December 31, 1995 of Trump's Castle Associates, L.P. and Subsidiary included in
this Registration Statement and have issued our report thereon dated February 7,
1997. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule is the
responsibility of the Partnership's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 7, 1997
S-2
<PAGE>
SCHEDULE II
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to
Beginning of Costs and Other Balance at
Period Expenses Charges End of Period
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Successor:
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts .. $ 1,544,000 $ 1,450,000 $(1,515,000)(A) $ 1,479,000
=========== =========== =========== ===========
Valuation allowance for interest
differential on CRDA bonds ..... $ 2,504,000 $ 1,368,000 $ (430,000)(B) $ 3,442,000
=========== =========== =========== ===========
PERIOD FROM OCTOBER 7, 1996
THROUGH DECEMBER 31, 1996
Allowance for doubtful accounts $ 2,007,000 $ 63,000 $ (526,000)(A) $ 1,544,000
=========== =========== =========== ===========
Valuation allowance for interest
differential on CRDA bonds ... $ 2,416,000 $ 100,000 $ (12,000)(B) $ 2,504,000
=========== =========== =========== ===========
Predecessor:
PERIOD FROM JANUARY 1, 1996
THROUGH OCTOBER 6, 1996
Allowance for doubtful accounts $ 1,969,000 $ 1,340,000 $(1,302,000)(A) $ 2,007,000
=========== =========== =========== ===========
Valuation allowance for interest
differential on CRDA bonds ... $ 1,744,000 $ 710,000 $ (38,000)(B) $ 2,416,000
=========== =========== =========== ===========
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts .. $ 3,704,000 $ 1,370,000 $(3,105,000)(A) $ 1,969,000
=========== =========== =========== ===========
Valuation allowance for interest
differential on CRDA bonds ..... $ 933,000 $ 936,000 $ (125,000)(B) $ 1,744,000
=========== =========== =========== ===========
</TABLE>
- ----------
(A) Write-off of uncollectible accounts.
(B) Write-off of allowance applicable to contribution of CRDA deposits.
S-3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
8 Opinion of Willkie Farr & Gallagher with respect to certain tax matters.
23.1 Independent Auditors' Consent of Arthur Andersen LLP.
EXHIBIT 8
September 11, 1998
Trump's Castle Hotel & Casino, Inc.
Trump's Castle Funding, Inc.
Huron Ave. and Brigantine Blvd.
Atlantic City, New Jersey 08401
Ladies and Gentlemen:
You have requested our opinion as tax counsel to Trump's Castle Funding,
Inc. ("Funding"), Trump's Castle Associates, L.P. (the "Partnership"), and
Trump's Castle Hotel & Casino, Inc. ("TCHI") concerning certain of the federal
income tax consequences in connection with the registration statement on Form
S-4, originally filed with the Securities and Exchange Commission (the "SEC") on
June 15, 1998 (which registration statement is hereinafter referred to as the
"Registration Statement"). Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Registration Statement.
In rendering this opinion, we have reviewed the Registration Statement and
such other documents that we deemed relevant. We have made inquiry as to the
underlying facts that we considered to be relevant to the conclusion set forth
in this letter. Further, the opinion expressed in this letter is based upon
certain factual representations set forth in the Registration Statement and the
assumption that the transactions will occur as described therein. We have no
reason to believe that these representations and facts are not true but have not
independently attempted to verify them. To the extent that we have examined and
relied upon original documents or copies thereof in rendering the opinion
expressed below, we have assumed (i) the authenticity of all documents submitted
to us as originals, (ii) the conformity to authentic original documents of all
documents submitted to us as copies, and (iii) the genuineness of all
signatures.
Based on such facts, assumptions and representations and our review of such
documents and information as we believed appropriate, and subject to the
qualifications stated below, as of the date hereof, we are of the opinion that,
under current law, the material federal income tax consequences resulting from
the Exchange Offer to a holder of Funding and Partnership's 10-1/4% Senior
Secured notes due 2004, Series A and to a holder of TCHI and Partnership's
10-1/4% Senior Secured Notes due 2003, Series A will generally be as is
described in the discussion of "Certain United States Federal Income Tax
Considerations" in the Registration Statement, and we adopt and incorporate that
discussion in this opinion.
This opinion is given as of the date hereof and is based on the Internal
Revenue Code of 1986, as amended, regulations, rulings and decisions in effect
as of the date hereof, all of which are subject to change (possibly with
retroactive effect) by legislation, administrative action or judicial decision.
Any such change may adversely affect or render inaccurate the opinion expressed
herein. Further, any variation or difference in the facts from those set forth
in the Registration Statement may affect the conclusion stated herein.
No opinion is expressed as to any matter not discussed herein.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
Exhibit to the Registration Statement and to the use of our name in the
Registration Statement and in the prospectus included therein.
Very truly yours,
/s/ WILLKIE FARR & GALLAGHER
---------------------------------------
Willkie Farr & Gallagher
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
September 11, 1998
