Celebrity real estate developer Donald Trump and investor Carl Icahn took their fight for the Atlantic City hotel-casinos bearing Trump's name to U.S. bankruptcy court on Tuesday.

At issue is control of bankrupt Trump Entertainment Resorts and use of the Trump name. Nearly a quarter of the resort's gaming sites are at stake.

Donald Trump and his daughter Ivanka have teamed with the company's bondholders to push a plan to invest $225 million in a reorganized Trump Entertainment by selling stock, and paying down some of the $485 million secured debt held by Texas banker and high-stakes poker player Andy Beal and Icahn, while forcing them to accept new terms on the remainder.

Icahn and Beal have drafted a competing plan.

For Trump, it would give the reality show regular up to 10 percent of the company and a way back to the business he walked away from a year ago, days before Trump Entertainment Resorts filed for bankruptcy for a third time.

The first day featured testimony from Marc Lasry, the billionaire chairman of Avenue Capital Group leading the bondholder group, and a video deposition from Icahn, as the two sides sought to convince the judge who had the more feasible plan.

The bankruptcy has featured fluid allegiances in a battle for three of Atlantic City's 11 casinos, a gaming market that a board member told the court was dropping fairly rapidly due to growing regional competition and a weak economy.

Michael Walsh, an attorney with Weil, Gotshal & Manges, which represents the company, admitted the case was unusually contentious.

I don't know if it's because four billionaires are involved, he said.

If Icahn comes out on top, the famed buyer of businesses on the cheap could end up with major stakes in Trump Entertainment's three Atlantic City properties, plus a hotel-casino there already controlled by Icahn.

Icahn and Beal, who in 2006 lost $11.6 million in a poker tournament to a group of gambling pros known as The Corporation, have proposed converting their secured debt into stock.

They also proposed $45 million in financing that would convert to equity when the company emerged from bankruptcy and an $80 million equity investment.

Icahn said he would expect to eventually buy out Beal to avoid a business suffering from too many cooks.

He dismissed the bondholder plan as a farce.

If they want to buy the business, they can pay us. They owe us $485 million, he said.

Beal and Icahn have said the bondholder plan risks putting the company back into bankruptcy by starving it of the cash it will need if the battered Atlantic City gaming market does not recover.

Bondholders have taken aim at Icahn's history of portfolio companies landing in bankruptcy and a potential branding problem. Trump has said Beal and Icahn do not have a right to use his name.

Maybe we keep the name, maybe we don't, said Icahn.

Bondholders said they have a deal to license the Trump name.

Our view is that Donald is a marketing genius, said Lasry. If you're able to use that brand it's something that no one else has.

Lasry's group invests in troubled companies and holds $175 million of the $1.25 billion in bond debt. Avenue Capital will end up with 22 percent of the reorganized Trump Entertainment Resorts and Lasry will take a board seat, under the bondholder plan.


The case has been marked by side-switching.

Before they were adversaries, Beal and Trump had joined forces and pushed for a plan that provided little recovery for bondholders, Trump's current allies.

Judge Judith Wizmur eventually opened the bankruptcy up to competing plans, and bondholders won over Trump.

Icahn is a latecomer to the case. He purchased a majority of the bank debt for 92.5 percent of face value from Beal Bank late last year, disrupting negotiations for a consensual plan.

I thought we were pretty close and trying to do a deal and then I was absolutely shocked when he sold the debt, said Lasry.

Icahn has taken an interest in gaming during the past year, one of the worst in the industry's history. He received bankruptcy court approval last month to buy the unfinished Fontainebleau Las Vegas Resort and he participated in a deal to buy Tropicana Entertainment LLC's Atlantic City casino.

Lasry summed up the fight as a bet on Atlantic City.

The whole key to this is do you believe that Atlantic City will continue and do you want to be an investor in Atlantic City? Ultimately there's the one really simple factor. Is Atlantic City in decline or is it flat and whether there will be an upswing?

The case is In re: TCI 2 Holdings, LLC, U.S. Bankruptcy Court, District of New Jersey, No. 09-13654

(Editing by Steve Orlofsky, Bernard Orr)