The 3 Atlantic City casinos once run by Donald Trump filed for Chapter 11 bankruptcy protection recently for the third time. These are the Taj Mahal, Trump Plaza Hotel and Casino, and Trump Marina Hotel Casino. The last bankruptcy filing for his casinos was 2004. Trump Entertainment Resorts made the bankruptcy filing after Mr. Trump resigned as chairman of the board. Mr. Trump resigned after bondholders and their allies on the board rejected Mr. Trump’s offer to buy the company and take it private. Although Mr. Trump’s name is still on the casinos, he is currently a minority stockholder of the casinos at 28 percent. According to court papers, the company has $2.06 billion in assets and more than $1.74 billion in debt. Since this is a chapter 11 bankruptcy, all 3 casinos will continue to operate as usual during the bankruptcy proceedings. Note that this filing does not include the new Trump hotel in Las Vegas. This hotel is owned by another company, which did not file for bankruptcy. Further, the hotel in Las Vegas is a 5 star hotel that does not have a casino.
The casinos had difficulty handling debt that was leftover from the last bankruptcy in 2004 because of the recession and drying up of credit due to the mortgage meltdown. In addition business for the casinos has slowed down due to competition from bling allowed in Pennsylvania and New York. The casinos could not pay $53.1 million of debt payment that was due the end of last year and started negotiating with bondholders on a refinancing of $1.25 billion in debt. Bondholders are people who lent money to the casinos in exchange for IOU’s of the casinos. Bondholders assume the risk that the IOU’s may not be paid because of higher interest payments promised by the casinos. Unlike bank deposits, the FDIC does not insure bonds. Thus, bondholders may suffer a significant reduction of principal or may even get nothing back from their loans to the debtor who has filed for bankruptcy protection. For instance, if you lent $10,000 to the casinos expecting to get 8 percent interest annually, you may end up getting not only no interest in the bankruptcy, you might even lose the entire $10,000, or the $10,000 you lent might be reduced by bankruptcy court to $1,000. There is nothing you can do about this if the plan approved by the court provides for this kind of treatment for bondholders.
Court papers list top creditors of the casinos as follows: $1.3 billion to bondholders; $7.4 million to Bovis Lend Lease, construction manager of the Chairman Tower which opened last year at the Trump Taj Mahal Casino Resort; $1.8 million to Thermal Energy Ltd which operates the air-conditioning system at the Taj Mahal, and the Hess Corp. owed $1.3 million. Other smaller creditors include slot machine suppliers, food service companies, limousine companies and advertising.
Since the casinos are under the protection of the bankruptcy court, they can continue operating business as usual. Thus, winning bets will be paid even if the casinos are bankrupt. But suppliers will have to deal more cautiously with the casinos otherwise they will end up with unpaid or partially paid bills. Most suppliers will probably require cash up front while the casinos go through bankruptcy. The CEO of the casinos announced however that the company is not seeking financing and has enough cash to fund its current operations.
Aside from the Trump casinos, another well know company, Charter communications, the cable company also filed for bankruptcy reorganization last week due to too much debt. Bankruptcy is a common survival tool used by American businesses when the going gets rough and the debt load becomes unbearable.
What happens to businesses happens to individuals too. If you have too much debt that you can no longer repay, consider a Chapter 7 "fresh start" or a Chapter 13 "reorganization" of your financial affairs to get you through.
If you need debt relief, contact my office. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published on February 21, 2009 Asian Journal Los Angeles p. C4 )
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