A federal bankruptcy judge has rejected a revised bankruptcy-exit plan for the Trump Taj Mahal casino in Atlantic City giving the casino’s owner Trump Entertainment Resorts Inc. another week to come up with a better plan.
“My concern is that there is simply too much immediate uncertainty,” Judge Kevin Gross of U.S. Bankruptcy Court in Wilmington, Del., said during a hearing. “There needs to be something in place that provides comfort that there is really a path to a plan.”
Under a revised bankruptcy plan, Trump Entertainment hoped to settle some of its debt owed to billionaire Carl Icahn through transferring ownership of the Taj Mahal and the closed Trump Plaza casino.
Under the plan, affiliates of Icahn would trade $292 million in debt for 55 percent of the stock in the company and a $100 million note that would not require cash interest payments. Instead, the amount owed to Icahn would increase over five years, according to bankruptcy court filings.
Officials said Icahn could recover 38 percent to 65 percent of his claim under the plan.
Unsecured creditors owed $13.5 million would receive nothing under the plan.
Icahn has said he would invest $100 million into the Taj Mahal. Icahn, however, has said that he will only agree to the plan if state and local governments agree to $175 million in aid over the next five years including $55 million immediately. Icahn is also seeking serious tax reductions from the city.
Icahn was also seeking union concessions to cut pension and health benefits to workers, which were granted when Gross ruled last month that the casino could break its union contract.
City Again Refuses Tax Cuts
Trump Entertainment has sent a letter to employees saying that it intends to close the casino December 1 if it does not receive the aid. That prompted dozens of Taj workers to march to Atlantic City’s City Hall to ask Mayor Donald Guardian to grant the tax cuts.
Guardian, however, said the city must deny a property-tax cut for the Taj, but told the workers he will work to secure the state aid.
Trump Entertainment has said the casino should be assessed at $300 million and has asked for a five-year tax-rate freeze. But Guardian told the workers that the city had already negotiated with Trump Entertainment earlier this year to cut the casino’s assessed value from $1 billion to $825 million.
“They’re back to the trough again,” he said.
Atlantic City has been battered by reassessments of casinos in the last year—many won in court—and has lost millions in taxes. Guardian said the city simply can’t offer more to the Taj Mahal.
As for the state aid, several lawmakers—including state Senate President Stephen Sweeney—have said the state will not offer the aid. But Jon Hanson, a key adviser to New Jersey Governor Chris Christie on matters involving gambling and Atlantic City, told the Press of Atlantic City that the request for aid will likely be discussed later this month at a Christie-convened summit on rehabilitating Atlantic City.
Trump Entertainment had also asked Gross for permission to give severance and accrued vacation pay to hundreds of former Trump Plaza workers under the company’s union contracts. The casino closed in September.
The company said 354 former Plaza employees are eligible for severance payments totaling about $531,000, Trump Entertainment Resorts said in a court filing Monday. Each of those employees should receive a one-time, $1,500 payment, the company said.
Also, 312 former Plaza workers are eligible to be paid for accrued vacation time. Those payments total about $55,000.
Rain Forest Café to Stay Open
In another matter before the court, Gross ruled that Atlantic City’s Rainforest Café—which is connected to the closed Trump Plaza—could continue to operate under a new lease.
The deal will give Rainforest Café control of its Boardwalk space for the next 20 years. Landry’s Inc.—which also owns Atlantic City’s Golden Nugget casino—has been fighting to keep the restaurant open in its prime Boardwalk location.
Under the deal, Rainforest Café must build walls separating itself from the closed Plaza and take control of trash service and maintain the roof above the restaurant, among other obligations, according to court papers.
