Atlantic City Casino Bankruptcies: Six Failures, Contractors and Bondholders Left Unpaid
Trump's Atlantic City ventures were financed substantially through junk bonds. The Trump Taj Mahal opened in April 1990 carrying $675 million in junk bond debt at interest rates of 14 percent; by December 1990 it was behind on interest payments. The first bankruptcy followed in 1991. Trump subsequently filed bankruptcies involving his casino holdings in 1992, 2004, and 2009. In each restructuring, bondholders and creditors took substantial haircuts. Trump negotiated to retain management fees and significant equity stakes as conditions of restructuring. He ultimately sold his remaining stake in Trump Entertainment Resorts in 2009 and 2010. Trump characterized the repeated bankruptcies as smart use of the legal system; critics noted the losses were borne primarily by investors and creditors, not Trump personally.
Record summary
Grade
Grade 2 of 5: Major Abuse of Power
Executive actions that exceed constitutional authority, circumvent statutory constraints, or weaponize government institutions for political ends. Scale and definitions
- Status
- Concluded
- Incident date
- Record updated
- Location
- Atlantic City, NJ
- Category
- Corruption & Self-Dealing
- Legal posture
- Reported
- War-crime classification
- Enabling conduct
- Verification
- Independently verified
- ICC relevance
- No
- Sources
- 4 cited
- Stable ID
trump-pre-presidency-atlantic-city-casino-bankruptcies- Victims
- Bondholders and investors who lost billions in the successive restructurings; contractors and vendors who were not paid for completed work; Atlantic City workers who lost jobs when casinos ultimately closed; the city of Atlantic City whose economy was damaged by the successive failures
- Alleged responsible parties
- Donald Trump, Owner and operator of Atlantic City casino empire; oversaw six bankruptcy filings; negotiated to retain personal assets and management fees during restructurings that imposed losses on creditors; described the bankruptcies as strategic use of the legal system— Trump Organization / Trump Hotels and Casino Resorts
Key points
- The Trump Taj Mahal opened in April 1990 with $675 million in junk bond debt at interest rates of 14 percent — a debt load that casino analysts at the time said was incompatible with the revenue the property could reasonably generate; the Taj Mahal filed for bankruptcy in November 1991 after missing interest payments; bondholders received 50 cents on the dollar in the restructuring
- Trump filed for personal bankruptcy protection in 1991 following the Taj Mahal failure, restructuring approximately $3.4 billion in debt; his personal financial arrangements allowed him to retain his primary residences and limit personal liability while lenders and investors absorbed losses; he emerged from the restructuring still owning significant assets
- In each bankruptcy restructuring, Trump negotiated to retain management fees from the casinos he had loaded with debt; the management fees provided Trump with income from the properties even as bondholders and investors took losses; the fee arrangements were criticized as self-dealing by creditors who were taking haircuts while paying fees to the entity that had created the debt problem
- Trump Casino Resorts filed for bankruptcy in 2004; Trump Entertainment Resorts filed for bankruptcy in 2009; the 2009 filing was the fourth bankruptcy involving Trump's Atlantic City holdings; Trump ultimately sold his remaining stake in Trump Entertainment Resorts and divested from Atlantic City entirely
- A 2016 New York Times analysis found that Trump received at least $1.1 billion in income from his Atlantic City casinos between 1995 and 2009 through salaries, bonuses, and management fees, even as the casinos collectively lost more than $1.2 billion and investors lost billions more; Trump characterized this as evidence of his business acumen — extracting value from failing businesses
- Trump defended the bankruptcies during the 2016 presidential campaign by saying he used the bankruptcy laws as 'the greatest businesspeople in the world use them' and that he had personally 'made a lot of money in Atlantic City'; he did not acknowledge the losses to creditors and investors who financed his casino ventures; when asked about bondholders who lost money, he said they knew what they were getting into
Overview
Trump's Atlantic City casinos went through six bankruptcy filings. Bondholders lost billions. Contractors were unpaid. The casinos eventually closed. Trump collected management fees and salary throughout, received more than $1 billion in personal income from properties that collectively lost $1.2 billion, and described the experience as proof of his business skill.
The Debt Structure
The Trump Taj Mahal opened in 1990 carrying $675 million in junk bond debt at 14 percent interest. Casino analysts said at the time that no Atlantic City property could generate the revenue needed to service that debt. The Taj Mahal was the largest casino in the world when it opened. It was behind on interest payments within months.
The debt was not a calculation error or an unforeseen market event. The Taj Mahal's finances were visible before it opened. The bond offering documents contained the numbers. The question was who would absorb the loss when the inevitable came.
The Restructuring Pattern
Each bankruptcy followed the same pattern: too much debt, missed interest payments, restructuring negotiations, creditors accepting less than owed, Trump negotiating to retain management fees and a reduced equity position.
The management fee arrangements were particularly significant. Trump's organization received fees from the casinos he had loaded with debt — income from properties that were failing to pay their creditors. In each restructuring, Trump negotiated to preserve these arrangements as a condition of cooperation.
The Numbers
The New York Times 2016 analysis documented the result: Trump received more than $1.1 billion in income from Atlantic City casinos between 1995 and 2009. The casinos collectively lost more than $1.2 billion in the same period. Bondholders and investors lost billions more in the restructurings.
Trump's response during the 2016 campaign was consistent: he had used the bankruptcy laws as the best businesspeople use them, he had made money personally, and the creditors who lost money had known what they were investing in.
He was correct that the bankruptcy laws worked as designed — for him. The creditors, contractors, and Atlantic City workers who bore the losses of the successive failures were less enthusiastic about his account of his business acumen.
Update log
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Based on 2016 campaign-era reporting on Atlantic City record.
Sequence of events
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Taj Mahal opens — $675M junk bond debt at 14%
The Trump Taj Mahal opens in Atlantic City as the largest casino in the world at the time. It carries $675 million in junk bond debt at 14 percent interest — a debt load casino analysts say is unlikely to be supportable by the property's projected revenues. Within months it is behind on interest payments.
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Taj Mahal files for bankruptcy — bondholders get 50 cents on dollar
The Trump Taj Mahal files for Chapter 11 bankruptcy. Bondholders accept 50 cents on the dollar in the restructuring. Trump negotiates to retain his ownership stake and management fees. It is the first of six bankruptcy filings involving his Atlantic City holdings.
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Trump Plaza Hotel and Casino files for bankruptcy
Trump Plaza Hotel and Casino files for Chapter 11 bankruptcy. The filing is separate from the Taj Mahal bankruptcy. Creditors again take losses in the restructuring.
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Trump Hotels and Casino Resorts files — third Atlantic City bankruptcy
Trump Hotels and Casino Resorts files for Chapter 11 bankruptcy for the third time involving Atlantic City holdings. The restructuring results in Trump's stake being diluted but him retaining management fees and a reduced ownership position.
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Trump Entertainment Resorts files — fourth Atlantic City bankruptcy
Trump Entertainment Resorts files for Chapter 11 bankruptcy, the fourth bankruptcy involving Trump's Atlantic City casinos. This is the final filing. Trump ultimately divests his remaining stake. The casinos eventually close entirely.
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NYT analysis: Trump received over $1.1B from casinos that lost over $1.2B
A New York Times analysis published during the presidential campaign finds that Trump received more than $1.1 billion in income from his Atlantic City casinos through salaries, bonuses, and management fees between 1995 and 2009, even as the casinos collectively lost more than $1.2 billion during the same period and investors lost billions in bond restructurings.
Sources
- Donald Trump's Deals in Atlantic City Cost Banks and Contractors Billions — The New York Times
- How Donald Trump bankrupted his Atlantic City casinos but still earned millions — The Washington Post
- Trump's Atlantic City history: six bankruptcies, big personal profits — The Associated Press
- Trump's Atlantic City Failures Cost Investors Billions — The Wall Street Journal