Just a couple of days after the closure of two Atlantic City casinos, it appears yet another is headed towards bankruptcy.
The Trump Taj Mahal could be facing Chapter 11 bankruptcy in a matter of days after the property was unable to meet the term on certain loans.
Can Bankruptcy Be Avoided?
Until recently, Trump Entertainment Resorts had been working on plans to avoid bankruptcy. Part of that plan centered on Carl Icahn converting some of the property’s debt into equity. Ichan owns the majority of the company’s debt. According to the New York Post, it appears those plans have fallen through.
The company continues to work on a plan to stave off bankruptcy, currently working with restructuring adviser Houlihan Lokey. The Taj recently laid off employees as a cost-cutting move. Prior to the move, they had around 5,000 employees.
Future for AC Casinos Continues to Be Grim
By the middle of September, four Atlantic City casinos will have closed their doors in 2014 and others may be forced into bankruptcy reorganization. The Atlantic Club shut down in January and the property was split between Caesars and Tropicana. The hotel property was later sold to a non-gambling entity.
Earlier this week, both the Revel and Showboat closed their doors. Revel had been in operation a mere two years and originally cost $2.4 billion to develop.
Trump Entertainment’s other casino, Trump Plaza, will close on September 16. Counting all four casino closures this year, over 8,000 people will have lost their jobs.
Unfortunately, the news isn’t getting any better. According to NY Post sources, unsecured debt for Caesars is now worth just 25 cents on the dollar as opposed to 50 cents at the beginning of summer.
Caesars still operates three properties in the city following Showboat’s closure. But a bankruptcy, whether Trump Taj Mahal or a Caesars casino, could be another major blow to the remaining Atlantic City gaming market.
Bankruptcy Doesn’t Necessarily Mean the End
While bankruptcy is a dire circumstance considering recent activity in Atlantic City, it does not necessarily mean the end for the Trump Taj Mahal. The 24-year-old casino has been part of three bankruptcies in its lifetime, the last in 2009 when Avenue Capital bought the property.
Chapter 11 bankruptcy allows a company to restructure its debts and remain in operation. This is done in an attempt to return to profitability.
Famous companies that have filed for Chapter 11 bankruptcy protection in the past include Chrysler, LLC, CIT Group, Washington Mutual, General Motors, Delta Air Lines and Texaco, Inc.