Atlantic City Casinos: Six Bankruptcies, Bondholders Wiped Out, Workers Unpaid
Trump's Atlantic City casinos were overleveraged from the beginning: the Taj Mahal alone carried $675 million in junk bonds at 14% interest when it opened in 1990. When revenue fell short of the debt service requirements, bankruptcy followed. Through six rounds of bankruptcy, Trump negotiated deals that preserved his equity stake or management role while bondholders received cents on the dollar. He personally profited $82 million in salary and fees from the casinos between 1995 and 2009 while publicly traded Trump Hotels & Casino Resorts lost $1.4 billion. Trump repeatedly characterized the bankruptcies as strategic use of 'the laws of this country' and claimed he had made 'a lot of money' on Atlantic City.
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
- 3 cited
- Stable ID
trump-pre-presidency-casino-failures-bankruptcy- Victims
- Bondholders and investors who lost hundreds of millions; Atlantic City workers who lost jobs in casino closures; small contractors who were not paid; the Atlantic City economy
- Alleged responsible parties
- Donald Trump, Primary owner/operator; extracted management fees and salary while investors bore losses through six bankruptcies; framed serial bankruptcy as financial acumen— Trump Hotels & Casino Resorts / Trump Entertainment Resorts
Key points
- The Trump Taj Mahal opened in April 1990 as the world's largest casino; it was financed with $675 million in junk bonds at 14% annual interest — a debt load Trump's own financial advisor described as unserviceable; the Taj filed for bankruptcy in July 1991, less than 18 months after opening
- Through the serial bankruptcies, Trump repeatedly negotiated to retain an equity stake or management role while bondholders took losses: in the 1991 Taj bankruptcy he gave up 50% equity in exchange for lower interest rates; in subsequent restructurings he remained involved while investors bore cumulative losses of hundreds of millions
- A New York Times analysis found that Trump earned $82 million in salary and fees from the Atlantic City casinos between 1995 and 2009, during which period the publicly traded Trump Hotels & Casino Resorts lost $1.4 billion — meaning Trump was personally profitable on an enterprise that was destroying outside investors' capital
- When Trump Hotels & Casino Resorts went public in 1995, Trump sold 10 million shares at $14 each, raising $140 million; shareholders who bought at IPO and held saw their investment decline 89% before the company's 2004 bankruptcy; Trump had already extracted significant compensation by then
- Trump's defense of the bankruptcies was consistent: 'Hundreds of companies use [bankruptcy]. I used the law four times and made a tremendous thing. I'm in business. I did a very good job.' He regularly characterized the legal tool of corporate bankruptcy as personal success
- The Atlantic City casinos' final closure — Trump Entertainment Resorts' Taj Mahal closed in October 2016 — marked the end of Trump's casino empire; the Atlantic City economy had been significantly harmed by the closures, with thousands of workers losing jobs
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.
Update log
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Documented during 2016 campaign reporting.
Sequence of events
-
Taj Mahal opens — $675M in junk bonds
Trump Taj Mahal opens as the world's largest casino. It carries $675 million in junk bonds at 14% interest. Financial analysts note the debt service exceeds projected revenue.
-
Taj Mahal files Chapter 11
15 months after opening, the Taj Mahal files for Chapter 11 bankruptcy. Trump gives up 50% equity to bondholders in exchange for debt restructuring. It is Trump's first major bankruptcy.
-
Trump Plaza and Trump Castle file for bankruptcy
Two additional Atlantic City Trump properties file for bankruptcy protection within months of the Taj filing. Multiple creditors take losses.
-
Trump Hotels & Casino Resorts IPO — $14/share
Trump takes the casino operation public at $14/share, raising $140 million. The stock will decline 89% before the company's 2004 bankruptcy. Trump extracts management fees and salary throughout.
-
Trump Hotels & Casino Resorts — fourth bankruptcy
The publicly traded Trump Hotels & Casino Resorts files for Chapter 11 for the fourth time. Bondholders take further losses. Trump retains a reduced equity stake.
-
Trump Entertainment Resorts — sixth bankruptcy
The restructured entity files for bankruptcy again during the financial crisis — the sixth bankruptcy of the Atlantic City operations. Trump eventually loses his remaining stake.
-
Taj Mahal closes permanently
The Trump Taj Mahal closes permanently, ending Trump's Atlantic City presence. Thousands of workers lose jobs. Atlantic City's downtown has multiple empty casino properties.
Sources
- Donald Trump's Business Plan Left a Trail of Unpaid Bills — The New York Times
- Trump's Atlantic City legacy: Shuttered casinos, empty lots — The Washington Post
- A history of Trump's casino bankruptcies — The Associated Press