Donald Trump phoned a Bear, Stearns & Co. investment banker six or seven months ago to ask about floating a bond issue.
"[The banker] said, 'Well, Donald, I don't like the idea, but let me get back to you," Mr. Trump recalled. The banker never got back.
"Now, he's getting back, and that's a good sign, Mr. Trump said as guest luncheon speaker at a Bear Stearns-sponsored high-yield conference.
Following what Mr. Trump called a "horrible year last year," his Atlantic City casino hotels rolled out some nice numbers during the year's first three months, he said.
"We've had an incredible three months, and we've really had an incredible six months," he said. The numbers had just come out, he added.
The Trump Taj Mahal turned out gross operating income of $19 million for the first three months of this year, an almost 27% increase over the $15 million during the same period in 1991.
"And the bonds really have gone very high at the Taj. I guess the bonds are up to 82 or so, and they've gone from a low of in the thirties to 82 now," he added.
Trump Plaza's gross operating profit for the first three month totaled $15 million, a 200% increase over $5 million in profits for the same period in 1991, he said. Trump Castle's gross operating profits for the same period totaled $7 million, a 75% increase over the $4 million for the same period last year, he continued.
"I think those bonds ... traded at one point at 19, and I was saying, banks, come on give me the money, let's go, let's buy the bonds," he said, adding, "But people weren't listening at that time, and now they're up to 72 I believe."
One high-yield source who requested anonymity said Mr. Trump's assessment of the bonds' performance was fairly on target. He showed the Taj Mahal bonds trading at 80 to 82, the Plaza's bonds at 111 1/4 to 112 1/4, and the Castle's bonds at 70 to 71.
The source said the rise in year-to-year profits should be viewed in the context of the Gulf War, which Mr. Trump acknowledged kept people glued to televisions and out of casinos during that period in 1991.
Asked what sparked the increase, the source cited restructurings of the three properties, the improved economy, and a change in Mr. Trump's focus.
Taj Mahal has already emerged from a pre-packaged chapter 11 restructuring, while plans for both the Castle and the Plaza had received bankruptcy court approval. The pair should emerge from chapter 11 in the next month to month-and-a-half, he said.
In addition, "He's not comping as excessively as he had been in the past," the source said, citing the developer's former propensity for dishing out freebies to attract crowds. Mr. Trump is now more focused on cash flows than revenues, something the high-yield market sees as a positive, he said.
Market News
In secondary trading, high-grade bonds lost about 1/8 point in the long end, while high-yield bonds moved up 1/8 point in quiet trading.
Federal Home Loan Mortgage Corp. issued $250 million of 6.82% notes due 1997 at par. Noncallable for a year, the notes were priced to yield 20.5 basis points over five-year Treasuries. Both Moody's Investors Service and Standard & Poor's Corp. rate the offering triple-A. Merrill Lynch & Co. managed the offering.
Union camp issued a two-part offering totaling $150 million. The first tranche consisted of $50 million of 7.375% notes due 1999. The noncallable notes were priced initially at 99.381 to yield 7.49% or 49 basis points over comparable Treasuries. The second consisted of $100 million of 8.5% notes due 2022. Noncallable for 10 years, the debentures were priced initially at 98.822 to yield 8.61% or 75 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A-plus. Salomon Brothers managed the offering.
Federal National Mortgage Association issued $100 million of 6.8% debentures due 1997. Noncallable for a year, the debentures were priced at 99.875 to yield 6.83% or 20.5 basis points over five-year Treasuries. Merrill Lynch managed the offering.
Integra Financial issued $100 million of 8.5% subordinated notes due 2002. The noncallable notes were priced at 99.765 to yield 8.535% or 120 basis points over comparable Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB. Lehman Brothers managed the offering.
Kentucky Utilities issued a two-part first mortgage bond offering totaling $86 million. The first tranche consisted of $53 million of 7.92% bonds due 2007 at par. The noncallable bonds were priced to yield 58 basis points over 10-year Treasuries. The second consisted of $33 million of 8.55% bond due 2027 at par. Noncallable for 10 years, the bonds were priced to yield 69 basis points over 30-year Treasuries. Moody's rate the offering Aa2, while Standard & Poor's rates it AA. Goldman, Sachs & Co. lead managed the offering.
Moody's is reviewing Phillips Petroleum Company's Baal senior long-term debt rating and Baa2 subordinated debt rating for a possible downgrade.
"Concerns that the outlook for weak oil and natural gas prices could have a continuing negative effect on the company's earnings and cash-flow protection measures" prompted Moody's review, the agency said.
Moody's has placed Norinchukin Bank's Aal long-term deposit and senior debt ratings on CreditWatch for a possible downgrade. Norinchukin's Prime-1 rating for short-term deposits is unaffected by the current review.
"The review will focus on Norinchukin's asset quality trends, as well as on the deteriorating condition of Japan's agricultural cooperative system and Nonrinchukin's role as the central financial institution of that system," the Moody's release said.
