The purge of Atlantic City's weakest casinos continued
Tuesday, as Trump Entertainment Resorts Inc. filed for bankruptcy in Delaware,
a week before it plans to shut down Trump Plaza.
The company also said it expects to pull the plug on Taj
Mahal in November if it fails to get concessions from the casino's unionized
workers.
The Taj Mahal, which employs 2,963, would be the fifth
Atlantic City casino to close this year.
Despite the threat of closure, Bob McDevitt, president of
Unite Here Local 54, said there was little the union could do to help bail out
Trump Taj Mahal.
"If our members were to work for minimum wage with no
benefits, it wouldn't be enough to keep this property in the hands of its
current owners for a year," he said.
"Trump's management team has tried desperately for
years to stave off the inevitable takeover by the lenders," McDevitt said.
According to court documents, Trump Entertainment's primary
lenders are affiliates of activist investor Carl Icahn, who last year blocked
the sale of Trump Plaza for $20 million because he thought the price was too
low.
Trump Entertainment has $285.6 million in first-lien debt
held by Icahn affiliates. Annual debt service totals $38 million - far more
than the money-losing Trump casinos can pay. Icahn also owns Tropicana Casino
& Resort Atlantic City, which has been profitable this year.
During a previous Trump Entertainment bankruptcy, in 2009
and 2010, Icahn lost a fight for control of the company to hedge-fund manager
Marc Lasry, whose Avenue Capital Group bought the properties out of bankruptcy
for $225 million.
Avenue Capital, which is based in New York and specializes
in buying distressed securities and loans, owned 21.7 percent of Trump
Entertainment's stock when the company emerged from bankruptcy in 2010. Avenue
has three representatives on Trump's eight-member board.
Public filings by former shareholders, including Putnam High
Yield Trust, a bond mutual fund that obtained shares in the 2010 bankruptcy,
show that those shares fell in value from $16 each in November 2010 to $2 each
three years later.
Putnam's latest filings show no Trump holdings, but other
funds' filings show that the privately traded shares were considered worthless
as early as July 2013.
After the previous bankruptcy, Trump Entertainment attempted
to retool its operations, but those efforts failed to increase revenue and
profits, Robert Griffin, the company's chief executive, said Tuesday in a court
filing.
Operating losses at Trump Entertainment, which also owns
Trump Taj Mahal, soared from $5.1 million last year to $17.8 million in the
first six months of this year alone, excluding an unusual expense of $7.8
million.
That put the company in a major cash crunch.
Griffin disclosed in bankruptcy documents Tuesday that Trump
Entertainment missed a quarterly property-tax payment of $10.8 million that was
due Aug. 28 and that it did not expect to have the cash to make a $9.5 million
interest payment due Sept. 30 to Icahn.
Joe Weinert, of Spectrum Gaming, a consulting firm in
Linwood, N.J., said that the bankruptcy could be taken in stride but that the
talk of closing Taj Mahal was unexpected.
"To hear that it might close before it really has a
chance to hit the reset button, both within its corporate structure and within
the resized Atlantic City, comes as a bit of a surprise," Weinert said.
BY THE NUMBERS
$17.8M Operating losses for the first six months of this
year at Trump Entertainment, owner of Trump Plaza and Trump Taj Mahal. This
excludes an unusual expense of $7.8 million.
$10.8M Missed quarterly property-tax payment that Trump
Entertainment was to have paid by Aug. 28.
$285.6M Trump Entertainment's first-lien debt held by
affiliates of activist investor Carl Icahn.
Source: Philly.com
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