Atlantic City Casinos: Six Bankruptcies, Bondholders Wiped Out, Workers Unpaid

Overview

Six bankruptcies in eighteen years. Each time, bondholders and investors took losses while Trump extracted management fees and salary. By the time the casinos finally closed, outside investors had collectively lost hundreds of millions. Trump had personally made $82 million from the same operations during a period they lost $1.4 billion.

His description of this: "I used the law four times and made a tremendous thing."

The Taj Mahal

The Taj Mahal was overleveraged from the opening day. $675 million in junk bonds at 14% interest required $93 million in annual interest payments before the casino had earned a dollar. Trump's own financial advisors knew this when the bonds were issued. The casino opened April 2, 1990. It filed for bankruptcy July 17, 1991.

Fifteen months.

The Pattern

The pattern through six bankruptcies was consistent: Trump would negotiate restructurings that preserved his equity stake or management role while cutting bondholders' returns. In the first bankruptcy, he gave up 50% equity but retained control and his management fees. In later restructurings, he took the company public, sold shares at peak valuations, and extracted compensation while shareholders bore the losses.

When Trump Hotels & Casino Resorts went public in 1995 at $14 per share, investors who held through the 2004 bankruptcy lost 89% of their investment. Trump had been paid throughout.

The Argument

Trump argued consistently that using bankruptcy law is financially sophisticated, not failure. "I used the law four times and made a tremendous thing." This argument is coherent only if you define success from the perspective of the person extracting money rather than the people investing it.

The bondholders who financed the Taj Mahal at 14% interest and received cents on the dollar after the 1991 bankruptcy had a different view of what "making a tremendous thing" looked like.