Trump Casinos Begin Chapter 11 Play a Fourth Time

NEW YORK (The Deal) -- Struggling Atlantic City, N.J., could be dealt another blow now that the parent company of the two Trump casinos in the city has filed for bankruptcy again after enduring years of a contracting gaming market.

Trump Entertainment Resorts Inc., the owner of the Trump Taj Mahal Casino Hotel and the Trump Plaza Hotel and Casino, submitted a petition on Tuesday in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Seven affiliates also filed petitions the same day.

In court papers filed Tuesday, Trump Entertainment sought approval of a slew of first-day motions, including requests for joint administration of the cases, to pay vendors, continue customer loyalty programs, use its cash management system, make payroll and use its cash collateral.

Judge Kevin Gross had not set a hearing on the matters as of Tuesday morning.

In court papers, CEO Robert Griffin said Trump Entertainment intends to close the Plaza on Sept. 16, and without major expense reductions and concessions from union workers employed at the location, the debtor will be forced to close the Taj Mahal by Nov. 13.

The closures would add to a particularly dismal year for Atlantic City: Revel AC Inc. closed its doors on Sept. 2 after it failed to find a buyer, Showboat Atlantic City shut down on Aug. 31 and the Atlantic Club Casino Hotel turned off its lights on Jan. 13.

In court papers, Trump Entertainment blamed its bankruptcy on negative Ebitda combined with crushing first-lien debt -- to the tune of $285.6 million, with an annual debt service expense of $38 million.

The debtor attributed its financial woes in part on a declining Atlantic City gaming market: gross gaming revenue in the area in 2013 was down 6.2% from the previous year. Trump Entertainment said increased competition within the city from new players such as Revel and the rebranding of Resorts Casino Hotel as Jimmy Buffett's Margaritaville, led to a decreased market share for the Trump properties.

The debtor also pointed out that competition from new casinos in nearby states, including Delaware, Maryland, New York and Pennsylvania, as well as a legislative push to legalize gambling in New Jersey outside of Atlantic City, further compounded the company's financial problems.

Trump Entertainment also said its business was hurt during Superstorm Sandy -- due to its properties' closure and "extensive damage" sustained by its main market. The company has submitted a $14 million business interruption claim to its insurance company, which is still pending.

This is not the casinos' first trip to bankruptcy court -- predecessor entities put the Trump Plaza, Trump Taj Mahal and a third property, the Trump Marina, into Chapter 11 on July 17, 1991, in New Jersey. They exited on Oct. 4, 1991.

Trump Entertainment's immediate predecessor, Trump Hotels & Casino Resorts Inc., then filed for bankruptcy on Nov. 21, 2004, and exited Chapter 11 the following year with an unsustainable balance sheet, including a $500 million secured credit facility and $1.25 billion in second-lien notes.

The company, renamed Trump Entertainment, hardly had time to get back on its feet before the global recession and increased competition in the area once again pushed it to file for Chapter 11 on Feb. 17, 2009.

Under a plan confirmed by the court on May 7, 2010, that took effect on July 16, 2010, the company received a $225 million capital infusion backstopped by its second-lien noteholders. Under that deal, 5% of the company's new equity was distributed to the noteholders, and 5% of the newly issued stock was issued to Donald J. Trump, who also holds warrants to purchase an additional 5% of the company's stock.

Since 2010, Trump Entertainment has attempted to slash costs and boost revenue, by cutting employee hours, selling noncore assets and entering into online gaming agreements.

The company sold the underperforming Trump Marina to Landry's Inc. affiliate Golden Nugget Atlantic City LLC in May 2011 for about $38 million in cash; a pier adjacent to the Taj Mahal for about $4.3 million; its off-site warehouse in Egg Harbor, N.J., for $1.9 million; and its former corporate offices for about $3.1 million, among other deals.

The debtor also has shopped the Plaza with the help of CBRE Richard Ellis Inc., but after only one party submitted a formal bid, the deal fell apart because the company could not secure releases of security interests in the property.

Trump Entertainment hoped to increase its lagging revenue after New Jersey legislation authorized online gaming in the state, and as a result, entered into two online gaming agreements last year.

"Initially thought to be a major boon to Atlantic City casino operators, actual results have thus far fallen short of expectations," Griffin said in court papers.

The company said Ebitda in fiscal 2013 was negative $5.1 million. The company's gaming revenue declined from about $394.8 million in 2012 to about $330 million in 2013, while hotel room revenue also dipped from about $73.3 million in 2012 to about $67.2 million in 2013 and food and beverage sales nosedived from about $57.1 million in 2012 to about $44.3 million in 2013.

The decline continued into the first half of 2014, with the company experiencing an 18.2% gaming revenue decline, a 1.9% hotel room revenue slide and a 23.8% beverage sales drop, while Ebitda totaled negative $25.7 million.

The Taj Mahal, which sits on more than 30 acres of beachfront property, has more than 2,000 hotel rooms, about 162,000 square feet of gaming space, an entertainment complex known as Xanadu Theater, restaurants and a gentleman's club.

The Plaza, located at the center of the boardwalk in Atlantic City, has more than 900 hotel rooms, 1,600 slot machines, 18,000 square feet of conference space, a cabaret theater, multiple restaurants and retail outlets.

In its petition, Trump Entertainment reported $100 million to $500 million in assets and liabilities.

The company's largest unsecured creditors include Thermal Energy Ltd. (owed 2.96 million), Levine, Staller, Sklar, Chan & Brown PA ($1.49 million) and Fertitta Acquisitions Co. LLC ($1.47 million).

Kristopher M. Hansen, Erez E. Gilad and Gabriel E. Sasson of Stroock & Stroock & Lavan LLP and Robert F. Poppiti Jr., Ian J. Bambrick and Ashley E. Markow of Young Conaway Stargatt & Taylor LLP are debtor counsel.

William Hardie, Jay Weinberger and Drew Talarico of Houlihan Lokey Inc. are Trump Entertainment's financial advisers.

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