Trump Entertainment has reached an agreement with its unsecured creditors that could open the door for a plan to turn over Atlantic City’s Trump Taj Mahal and closed Trump Plaza to billionaire Carl Icahn to go forward.
At the same time, however, the Hard Rock Café located at the casino sent a shock through the city when it warned its workers that it might close in April, but later clarified that the warning was just a precaution in case the Taj Mahal bankruptcy is not approved.
Trump Entertainment and a panel of its unsecured creditors reached a deal that would set aside $3.5 million to settle the creditor’s claims. Previously, only $1 million was proposed.
The settlement “allows us to support the plan” and opens a path for Trump Entertainment to exit bankruptcy on schedule, Karen A. Giannelli, a lawyer for the committee of unsecured creditors told Bloomberg News.
Trump Entertainment filed for bankruptcy in September and then quickly shut Trump Plaza. The Taj Mahal remains open, but has been on the brink of closing several times as the potential deal with Icahn has ebbed and flowed through the bankruptcy proceedings.
Icahn is the primary debt holder against Trump Entertainment. Under the deal he would exchange about $286 million in debt for ownership of the two properties and then invest about $100 million into the Taj Mahal.
The deal has been bitterly opposed by city casino workers’ unions, however, and Icahn has not been able to get union concessions or tax breaks from New Jersey or Atlantic City that he has sought. Still, the Taj is currently open because Icahn pumped another $20 million into the property.
The unsecured creditors had opposed the reorganization plan, backed by the Icahn lenders, because they would only get to split a $1 million fund, for a recovery of less than 1 percent of what they were owed.
“The most significant aspect is the $1 million fund for unsecured creditors has been increased to $3.5 million,” Giannelli told the news service. The unsecured creditors will “stand down on all of the litigation” against the lenders and won’t seek to investigate them further, she said.
The unsecured creditor panel was seeking court permission to sue to invalidate some of the lender claims and increase its members’ recovery.
The settlement, however, “doesn’t commit any individual member to support the plan,” Giannelli said, meaning Unite Here Local 54, the union representing Trump Entertainment workers, can still object on its own behalf, Bloomberg reported.
The settlement also does not affect the union’s appeal of a bankruptcy court ruling to nullify Trump Entertainment’s union contract.
Meanwhile, Atlantic City’s Hard Rock Cafe said it will remain open as long as the Taj Mahal is open.
The restaurant and bar filed a warning notice last week with the New Jersey Labor Department of a potential April 22 closing, putting 73 people out of work.
But its parent company told the Associated Press that the cafe plans to operate through its current lease, which expires at the end of 2016.
“Conditional notices required under the Worker Adjustment and Retraining Notification Act were issued to employees in the event that the Taj Mahal bankruptcy plan is not approved, resulting in the closure of the Taj Mahal,” Hard Rock International said in a statement.
