Mar. 31, 2004 -- If the Donald Trump wannabes on The Apprentice got as bad a report as Trump Hotels & Casino Resorts Inc. got yesterday from its auditors, they would no doubt be headed for the boardroom for a ritual firing. 

Instead, the auditors -- apparently unimpressed by the success of Trump's reality TV show -- warned that Trump's casino company looked about ready to go belly-up. 

Citing increased competition, recurring operating losses, and debt, Ernst & Young L.L.P. said in a filing with the Securities and Exchange Commission yesterday that there was "substantial doubt about the company's ability to continue as a going concern," unless it could complete a major restructuring. 

That might have been enough to take the high-flying Trump down a few notches. But there was also news yesterday that gaming regulators in Atlantic City had requested a copy of the last episode of The Apprentice -- taped in Atlantic City -- to see whether all necessary approvals had been granted. 

Reached in his New York office yesterday, Trump attributed all the flak to people "totally taking shots" at him because of his newfound success. 

"That goes with the territory," said Trump, 57, who according to yesterday's filing was paid a salary of $1.5 million but did not get any bonuses or stock options. "It's the No. 1 show." 

But the casino company, which operates the Trump Taj Mahal Casino Resort, Trump Plaza Hotel & Casino, and Trump Marina Hotel Casino in Atlantic City, is saddled with $1.8 billion in debt and has barely had enough money to make interest payments and cover its operations. 

It has been unable to finance improvements or expansions, making it less competitive with its rivals, most notably the Borgata Hotel Casino & Spa. 

The company's losses totaled $87.3 million in 2003, $12 million in 2002, and $25.3 million in 2001, the auditors noted in the annual report filed with the SEC, along with a letter to the Trump board of directors expressing concern. The company had a working capital deficit of $46.9 million at the end of 2003. 

"Due to these factors, the company has not been able to expand its operations or reinvest in the maintenance of its owned properties at desired levels," the auditors wrote. "Furthermore, the company does not currently have any short-term borrowing capacity available." 

What the company has, it says, is a plan -- and a chairman of the board with a television show that has become a pop-culture phenomenon. 

Trump downplayed the auditor's letter yesterday and the bleak financial picture painted by the annual report. 

He said the debt would not be due for two more years. "We're doing good business," he said. 

In addition to the three Atlantic City casinos, Trump operates a riverboat casino in Indiana and manages an American Indian casino in California. 

Trump's Atlantic City properties brought in about $1 billion in gambling revenue in 2003, out of a total of about $4.5 billion for all 12 casinos in the resort. In February, the latest month for which figures were available, the Taj Mahal finished fourth, the Plaza eighth, and the Marina 10th in revenue. 

Trump is counting on negotiating a deal with the company's bondholders -- talks are under way -- that would pave the way for Credit Suisse First Boston to pump $400 million into the company. 

The bondholders have to agree to accept less than face value for their bonds. About $1.3 billion in debt comes due in two years; the rest in 2010.

The deal would leave Trump as chairman but not as chief executive officer. His percentage of stock ownership would fall from 49 percent to 20 percent. 

Scott Butera, the Trump official overseeing the negotiations and the recapitalization attempt, said the auditors' note -- which is not uncommon when a company is trying to restructure -- raised issues the company had already addressed in its recapitalization plan. 

He said the company would be able to make a $73 million interest payment due May 1 -- with a grace period of 30 days. If a deal with the bondholders is not reached, Butera said, the company has alternative plans. Analysts have said some form of bankruptcy might be the way out at that point. 

"I think we have a good company with good assets and a good management team and a good plan," Butera said. "I think we're over-leveraged, and we're addressing that." 

Shares of Trump Hotels fell 35 cents to $2.71 in New York Stock Exchange composite trading yesterday. It fell an additional 2 cents to $2.69 in after-hours trading. Overall, shares have risen 25 percent this year. 

Andrew Susser, a bond analyst with Bank of America, said that at least Trump was trying to get some cash back into the company and that the report contained the news that Trump's creditors would all be paid. 

"In the past, he's threatened not to pay. Here, he has someone willing to put in cash and try to make a go of it. He's to be commended for that," Susser said. "That being said, getting from point A to point B is going to be difficult." 

Meanwhile, in the regulatory world, the New Jersey Division of Gaming Enforcement was reportedly looking into whether any additional approvals were needed before Apprentice contestants conducted their competing promotional events on last week's episode, taped at the Trump Taj Mahal. One group ran a $1,000 wheel-spin promotion; the other bombed with an offer for a $300 rental of a sports car. 

Dan Heneghan, spokesman with the state Casino Control Commission, said the casino had been granted approval to tape the episode. It was not clear whether any other approvals were needed. 

Trump said yesterday that the episode -- watched by 29 million viewers -- was "the best thing to happen to Atlantic City in many years." 

But plans to tape the finale live from the Taj Mahal have been scrapped. The show will finish up in New York. 

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(c) 2004, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune Business News. DJT, CSR,