Attacks Merrill Lynch Report With AM-Trump
Jul. 26, 1990
LAS VEGAS (AP) _ Gaming giant Bally Manufacturing Corp. accused Merrill Lynch & Co. on Thursday of smearing its financial reputation to divert attention from support that the nation's biggest brokerage gave Donald Trump's Taj Mahal resort. Merrill denied the accusation.
Bally chairman Robert Mullane said he was outraged because of a July 11 analysis by Merrill analysts Richard Byrne and David Waill, which said Bally was excessively indebted and must take aggressive action to stay solvent through 1991. Bally is one of Trump's main rivals in the gambling business.
''The smell of this is awful,'' Mullane said.
''It's hard to believe they would do that, unless they had a preconceived notion to get this company,'' he said. ''I think somebody ought to remember the people that brought you the Bally criticism brought you the Taj Mahal bonds.''
Merrill Lynch is one of the underwriters of bonds for the Taj Mahal in Atlantic City, N.J., one of the most extravagant gaming casino-hotels in the country.
But brokerage officials denied Mullane's contentions and said they stood by the analysis of Bally, a leading gaming equipment and hotel-casino company, based in Chicago.
The investment firm, the nation's largest, had no comment Thursday on a report that it was advising Trump on a plan that would allow bondholders in his Atlantic City casinos to receive equity for the debt they hold.
That would mean Trump could forego some interest payments on the bonds, which have but enormous pressure on the New York developer's own shaky financial structure.
The Wall Street Journal said in Thursday's editions the deal involves $1.3 billion in debt on the casinos, which have suffered from a general decline in the Northeast economy.
''It's my personal opinion there has been a concentrated effort by a major brokerage house to discredit Bally in an effort to help direct attention away from the problem they had,'' Mullane said in a telephone interview Thursday from his Chicago office.
Martin Fridson, managing director in charge of high yield research at Merrill Lynch's New York office, denied any relationship between the Bally report and the Trump bonds.
''A given report has nothing to do with another company,'' Fridson said. ''We see no reason to modify the (Bally) report.''
Bally operates two hotel-casinos in Atlantic City, where Trump opened his Taj Mahal earlier this year. The company also has a hotel-casino in Las Vegas, and one in Reno.
In addition, the company has a chain of health fitness centers and manufactures gaming and amusement equipment.
Mullane spoke after issuing a financial report that showed Bally's second- quarter earnings totaled $9.2 million. The results compared with earnings of $21.5 million a year earlier, but that stemmed from a one-time, $34 million gain on the sale of a subsidiary, without which Bally would have shown a loss.
Company revenues increased from $519 million in the second quarter of 1989 to $554 million in the same period this year.
Mullane charged the writers of the Merrill Lynch report had grossly undervalued Bally properties in Las Vegas and Reno. The report said the 2,900- room hotel-casino in Las Vegas and the 2,000-room resort in Reno were appraised at $525 million but had an actual value of $225 million to $300 million.
''The hotel in Las Vegas sits on the most valuable piece of land in the casino business,'' Mullane said. ''If that property isn't in the $500 million range, I'd be shocked.''
He estimated the value of the Reno property at $100 million to $125 million, but added ''I'm not in the mode to sell them.
''They went out and put ridiculous prices on them to create this nonsense story,'' Mullane said.
Mullane said the company was considering selling its health and fitness division, but denied the company needed to sell any assets to meet principal and interest payments.
He agreed with the analysts that the opening of the Mirage Hotel in Las Vegas and the Taj Mahal in Atlantic City had cut into Bally's business.
''Sure they've had an impact, but not to the point of being terribly serious,'' Mullane said. ''Everybody's off. When a new place opens, everybody goes for that first look. But we'll weather that storm very nicely.''