Beruflich Dokumente
Kultur Dokumente
HowDonaldTrumpBankruptedHis
AtlanticCityCasinos,butStillEarned
Millions
ByRUSSBUETTNERandCHARLESV.BAGLI JUNE11,2016
ATLANTICCITYTheTrumpPlazaCasinoandHotelisnowclosed,itswindows
cloudedoverbyseasalt.OnlyafaintoutlineofthegoldlettersspellingoutTRU
MPremainsvisibleontheexteriorofwhatwasoncethiscityspremiercasino.
Notfaraway,thelongfailingTrumpMarinaHotelCasinowassoldatamajor
lossfiveyearsagoandisnowknownastheGoldenNugget.
Atthenearlydesertedeasternendoftheboardwalk,theTrumpTajMahal,now
undernewownership,isallthatremainsofthecasinoempireDonaldJ.Trump
assembledheremorethanaquartercenturyago.Yearsofneglectshow:Thecarpets
arefrayedanddustcoatedchandeliersdangleabovethefewcustomerstheretoplay
thepennyslotmachines.
Onthepresidentialcampaigntrail,Mr.Trump,thepresumptiveRepublican
nominee,oftenboastsofhissuccessinAtlanticCity,ofhowheoutwittedtheWall
Streetfirmsthatfinancedhiscasinosandrodethevalueofhisnametoriches.A
centralargumentofhiscandidacyisthathewouldbringthesamebusinessprowess
totheOvalOffice,doingforAmericawhathedidforhiscompanies.
AtlanticCityfueledalotofgrowthforme,Mr.Trumpsaidinaninterviewin
May,summinguphis25yearhistoryhere.ThemoneyItookoutoftherewas
incredible.
Hisaudaciouspersonalityandopulentpropertiesbroughtattentionand
countlessplayerstoAtlanticCityasitsoughttoovertakeLasVegasasthe
countrysgamblingcapital.Butacloseexaminationofregulatoryreviews,court
recordsandsecurityfilingsbyTheNewYorkTimesleaveslittledoubtthatMr.
Trumpscasinobusinesswasaprotractedfailure.Thoughhenowsayshiscasinos
wereovertakenbythesametidalwavethateventuallyslammedthisseasidecitys
gamblingindustry,inrealityhewasfailinginAtlanticCitylongbeforeAtlanticCity
itselfwasfailing.
Butevenashiscompaniesdidpoorly,Mr.Trumpdidwell.Heputuplittleofhis
ownmoney,shiftedpersonaldebtstothecasinosandcollectedmillionsofdollarsin
salary,bonusesandotherpayments.Theburdenofhisfailuresfelloninvestorsand
otherswhohadbetonhisbusinessacumen.
InthreeinterviewswithTheTimessincelateApril,Mr.Trumpacknowledgedin
generaltermsthathighdebtandlaggingrevenueshadplaguedhiscasinos.Hedid
notrecalldetailsaboutsomeissues,butdidnotquestionTheTimessfindings.He
repeatedlyemphasizedthatwhatreallymatteredabouthistimeinAtlanticCitywas
thathehadmadealotofmoneythere.
Mr.Trumpassembledhiscasinoempirebyborrowingmoneyatsuchhigh
interestratesaftertellingregulatorshewouldnotthatthebusinesseshad
almostnochancetosucceed.
Hiscasinocompaniesmadefourtripstobankruptcycourt,eachtime
persuadingbondholderstoacceptlessmoneyratherthanbewipedout.Butthe
companiesrepeatedlyaddedmoreexpensivedebtandreturnedtothecourtfor
protectionfromlenders.
Afternarrowlyescapingfinancialruinintheearly1990sbydelayingpayments
onhisdebts,Mr.Trumpavoidedasecondpotentialcrisisbytakinghiscasinos
publicandshiftingtherisktostockholders.
Andheneverwasabletodrawinenoughgamblerstosupportallofthe
borrowing.Duringadecadewhenothercasinosherethrived,Mr.Trumpslagged,
postinghugelossesyearafteryear.Stockandbondholderslostmorethan$1.5
billion.
Allthewhile,Mr.Trumpreceivedcopiousamountsforhimself,withthehelpof
acompliantboard.Inoneinstance,TheTimesfound,Mr.Trumppulledmorethan
$1millionfromhisfailingpubliccompany,describingthetransactioninsecurities
filingsinwaysthatmayhavebeenillegal,accordingtolegalexperts.
Mr.TrumpnowsaysthatheleftAtlanticCityattheperfecttime.Therecord,
however,showsthathestruggledtohangontohiscasinosyearsafterthecityhad
peaked,andfailedonlybecausehisinvestorsnolongerwantedhimina
managementrole.
TherearethoseherewhofondlyrememberMr.Trumpsshowmanship,the
thousandsheemployedinastrugglingcity,andthetensofmillionsofdollarsintax
revenuehiscasinosgenerated.
Hewasagreatpersonforthecompany,saidScottC.Butera,thepresidentof
Mr.Trumpscompanyatthetimeofits2004bankruptcy.Withhisoversight,his
brandandmarketing,hesreallyadept.
Manyothersweregladtoseehimgo.
Heputanumberoflocalcontractorsandsuppliersoutofbusinesswhenhe
didntpaythem,saidStevenP.Perskie,whowasNewJerseystopcasinoregulator
intheearly1990s.SowhenheleftAtlanticCity,itwasnt,Sorrytoseeyougo.It
was,Howfastcanyougetthehelloutofhere?
Itstrulygoingtobeanincredibleplace1990
DonaldTrumpdartedbeneaththe70goldtippedminaretsandninecarved
elephantsthatlinedtheroof,throughthelobbyandacrossthecasinofloor,
seeminglyoblivioustothespectatorscriesofDonald,Donald,andthegamblers
clutchingbricksof$100billsattheblackjacktables.
ItwasApril1990,andMr.Trumpwasofficiallyopeninghisthirdgamblingresortin
AtlanticCity,thebiggestprojectofhiscareer:the$1billionTrumpTajMahal.
Itstrulygoingtobeanincredibleplace,hetoldreporters.Werecallingitthe
eighthwonderoftheworld.
TheTajwascertainlyofoutsizeproportions:Its42storytowerwasNew
Jerseystallestbuilding,andthecasinowastheworldslargest.
Inaremarkablyshorttime,Mr.Trumphadbecomeacommandingfigurein
AtlanticCity,withhiscasinosaccountingfornearlyathirdofitsgamblingrevenues
andemployingmorethan8,000people.
TrumpPlazacamefirst.Intheearly1980s,Mr.Trumpgainedcontrolofa
primespotontheboardwalk.Unabletogetfinancingtobuildacasino,heforgeda
partnershipwithHarrahsEntertainment,anationalgamblingoperator.
HarrahsagreedtoprovideMr.Trump,whodidnotputanyadditionalmoney
intothedeal,with$220millioninfinancingtobuildtheproject,topayhima$24
millionconstructionmanagementfeeandtogivehimhalftheprofits.
The39storyHarrahsatTrumpPlazaopenedin1984.
Fromthestart,thepartnerswereatoddsoveritsmarketingandwhosename
shouldbeparamount.
Itwasntawelldesignedpartnership,saidPhilipG.Satre,theretired
chairmanofHarrahs.Wewereabigcompanywithaninstitutionalapproachto
runningabusiness,andhewasarealestateentrepreneurwhokindofshotfromthe
hip.
ThenMr.TrumpboughtHiltonsnearlycompletedcasinointhemarinadistrict
for$320million,callingitTrumpCastle.Hiscompanyissued$352millioninbonds
tofinishconstructionandopenthecasino,andtackedonanadditional$32million.
Thatcasinoopenedin1985andcompeteddirectlyagainsthispartnersfirstcasino,
HarrahsMarina.
Thefollowingyear,HarrahsscuttleditspartnershipwithMr.Trumpandsold
himitsstakeinTrumpPlazaformorethan$220million.
NextMr.Trumpwentafterthebiggestcasinoofall,theTajMahal,which
ResortsInternational,builderofAtlanticCitysfirstcasino,waserecting.After
buyingacontrollinginterestinResortsfromtheestateofitsfounder,Mr.Trump
battledthetalkshowhostMervGriffinforcontrolofthecompany.
Intheend,Mr.Griffingotthecompany,whileMr.Trumpwonthestill
unfinishedTajMahal.
EvenbeforetheTajopened,theNewJerseyCasinoControlCommissionwas
concernedaboutthecasinosviabilitygivenitsrapidlyescalatingcostsand
consideredrevokingitsoperatinglicense.Regulatorscloselymonitoredthefinancial
performanceoftheTrumpcasinosandthedevelopersempire.
Mr.Trumptoldthecommissionin1988thathecouldreininexpenses,because
conventionallenderswerelininguptogivehimmoneyatlowinterestrates.Hesaid
heabhorredjunkbonds,whichwerethenpopular,becausetheycarriedabiggerrisk
ofdefaultandthuscamewithhigherinterestrates.
Withinmonths,hereversedcourse,issuing$675millionworthofjunkbonds,
witha14percentinterestrate,tofinishconstructionandgettheTajopen.Inrecent
interviews,Mr.Trumphassaidthatwitheachfinancingheroutinelytookmoneyout
ofthecasinostoinvestinManhattanrealestate.TotaldebtontheTajexceeded
$820million.
Lessthantwoweeksbeforethecasinoopened,MarvinB.Roffman,acasino
analystatJanneyMontgomeryScott,aninvestmentfirmbasedinPhiladelphia,told
TheWallStreetJournalthattheTajwouldneedtoreap$1.3millionadayjustto
makeitsinterestpayments,asumnocasinohadeverachieved.
Themarketjustisntthere,Mr.RoffmantoldTheJournal.
Mr.Trumpretaliated,demandingthatJanneyMontgomeryScottfireMr.
Roffman.Itdid.
Itwasdoomedwaybeforethestart,saidW.BuckyHoward,whowas
promotedbyMr.TrumptopresidentoftheTajfivedaysafteritopened,inarecent
interview.Itoldhimitwasgoingtofail.TheTajwasunderfunded.
Almostimmediately,Mr.Trumphadtroublemakingthedebtpaymentsonthe
Tajandhisothercasinos.ItwasalsoclearthattheTajwascannibalizingtheCastle
andthePlaza,whosecombinedgamblingrevenuesdroppedby$58milliontheyear
itopened.
Aftermorethantriplingasnewcasinosopenedthroughthe1980s,gambling
revenuesinAtlanticCityflattenedin1990,risingbyjust1.35percent,asgamblers
grewmorecautiousinlightofanationalrecession.Allwerehurt,recalledMr.
Perskie,thecasinoregulator,butnonewereinthecatastrophicfinancialshapeof
Mr.Trumps.
Atthesametime,Mr.TrumpsrealestateempireinManhattan,wherethe
recessioncutpropertyvalues,wasalsofailing.
InanAugust1990report,NewJerseyregulatorsnotedthesheervolumeof
debtonMr.Trumpsholdings:$3.4billion,including$1.3billiononthecasinos
and$832.5millioninloanspersonallyguaranteedbyMr.Trump.Regulators
warnedthenthatthepossibilityofacompletefinancialcollapseoftheTrump
Organizationwasnotoutofthequestion.
TheTajMahalmisseditsNovemberdebtpayment.TheCastlewasalsolate.
ByDecember1990,whenMr.Trumpneededtomakean$18.4millioninterest
payment,hisfather,FredC.Trump,sentalawyertotheCastletobuy$3.3millionin
chips,toprovidehimwithaninfusionofcash.TheyoungerMr.Trumpmadethe
payment,buttheCasinoControlCommissionfinedtheCastle$65,000forwhathad
amountedtoanillegalloan.
Asallofhisventuresnearedcollapse,Mr.Trumpslendersinsistedthathe
submitabusinessplan,appointachieffinancialofficerfortheTrumpOrganization
andsell,amongotherthings,theTrumpShuttleairline,hisyachtandhisstakein
NewYorkCitysPlazaHotel,whichalsofiledforbankruptcyprotection.Theyalso
puthimona$450,000amonthbudgetforpersonalandhouseholdexpenses.
Justoverayearafteritopened,theTajMahalwasinbankruptcycourt,followed
in1992byboththePlazaandtheCastle.Intheplanthatwasworkedout,Mr.
Trumpcededtothelendersa50percentstakeinthebusinessesinreturnforlower
interestrates.Thelendersagreedtodefercertainprincipalandinterestpayments
andholdoffonpersonalclaimsagainstMr.Trumpforfiveyears.Buttherewaslittle
ornoreductionintheenormousdebtsthatwouldplaguehisgamblingempirefar
intothefuture.
Mr.Trumpnowsayshelooksbackontheperiodashisgoldenerainthecasino
business.
Earlyon,Itookalotofmoneyoutofthecasinoswiththefinancingsandthe
thingswedo,hesaidinarecentinterview.AtlanticCitywasaverygoodcashcow
formeforalongtime.
Otherswerehurt.
HehelpedexpandAtlanticCity,buthejustdidnotputtheequityintothe
projectsheshouldhavetokeepthemsolvent,saidH.StevenNorton,acasino
consultantandaformercasinoexecutiveatResortsInternational.Whenhewent
bankrupt,henotonlycostbondholdersmoney,buthehurtalotofsmallbusinesses
thathelpedhimconstructtheTajMahal.
BethRosserofWestChester,Pa.,isstillbitteroverwhathappenedtoherfather,
whosecompanyTriadBuildingSpecialtiesnearlycollapsedwhenMr.Trumptook
theTajintobankruptcy.Ittookthreeyearstorecoveranymoneyowedforhiswork
onthecasino,shesaid,andherfatherreceivedonly30centsonthedollar.
Trumpcrawledhiswaytothetoponthebackoflittleguys,oneofthembeing
myfather,saidMs.Rosser,whorunsTriadtoday.Hehadnoregardforthousands
ofmenandwomenwhoworkedonthoseprojects.HesayshellmakeAmericagreat
again,buthispastshowsthecompleteoppositeofthat.
Itwillbethebest1996
DonaldTrumphassaidthathisbrusheswithfinancialdisasterintheearly1990s
remindedhimofalessonhisfatherhadtaughthim:Donotleaveyourselfonthe
hookforloans.
Myfatherknew,likeIknew,youdontpersonallyguarantee,Mr.Trumpis
quotedsayinginTrumpNation:TheArtofBeingtheDonald,byTimothyL.
OBrien,aformerreporterforTheTimes.IvetoldpeopleIdidntfollowmyown
advice.
Hisagreementswithlendersandthetwocasinobankruptciesinthoseyearsstill
leftMr.Trumppersonallyresponsibleformorethan$100millionindebt,andhis
agreementshadonlydelayedthedayofreckoningtoJune30,1995.
Hedealtwiththatdangerbyfirstshiftingmuchofhispersonaldebtontohis
casinos,thenontoanewgroup:shareholders.
Step1camein1993,whenhiscompanysoldmorejunkbonds,addinganother
$100millionindebttotheTrumpPlazacasino.Morethanhalfofthenewmoney
wenttopayoffMr.Trumpsunrelatedpersonalloans.
Then,inJune1995,withtheriskofbeingforcedintobankruptcyjustweeks
away,Mr.TrumpshiftedownershipofthePlazacasinotoanew,publiclytraded
company:TrumpHotelsandCasinoResorts.Intheinitialpublicoffering,10million
sharesweresoldat$14.Atthesametime,thecompanyalsosoldanother$155
millioninjunkbonds,ata15.5percentinterestrate.
BecomingapubliccompanyburdenedMr.Trumpwiththeresponsibilityof
puttingshareholdersinterestsfirst.ButMr.Trump,thelargestshareholderand
chairmanoftheboard,couldgenerallymeetthatobligationbyobtainingapproval
fromhisboardofdirectorsanddisclosingfinancialdetailsinsecuritiesfilings.The
boardsthreeoutsidememberswerewidelyseenasbowingtohiswishes.
Aweekaftertheinitialpublicoffering,thenewcompanybeganusingsomeof
thealmost$300millionithadraisedtoclearMr.Trumpspersonaldebts.During
hisfinancialpinchtwoyearsearlier,ChemicalBankhadforcedMr.Trumptogive
uphisownershipoftheTrumpRegency,ahotelnexttotheTrumpPlaza.Heheldan
optiontobuyitbackfor$60million,whichincludeddebtonthehoteland$35.9
millionthathepersonallyowedthebankfromhispurchaseofaManhattan
property.Thenewcompanyexercisedthatoption,ineffecttransferringMr.Trumps
debttoitsownbalancesheet.
In1996,thepubliccompanyissuedmorestockandsold$1.1billioninjunk
bonds.Themoneywasusedinparttopayoff$330millioninbondsonthePlaza
thathadbeenguaranteedbyacompanyMr.Trumpcontrolled,aswellasalmost$30
millionthatMr.Trumppersonallyowedtotwobanks.Thecompanyalsoboughtthe
TrumpTajMahalandTrumpCastlesoonrenamedtheTrumpMarinashifting
moreofMr.Trumpsdebttoshareholders.
Mr.Trumpcelebratedhis50thbirthdaythatJuneattheTajMahal,withthe
BeachBoysonstage.Aflurryofnewsarticlessaidhewasbacksomeevenquoted
Mr.Roffman,theanalystwhomMr.Trumphadgottenfired,givingMr.Trump
creditforturningthingsaround.(Mr.Roffmanhadwona$750,000arbitration
awardfromJanneyMontgomeryforhisdismissalandsettledalawsuitagainstMr.
Trumpforanundisclosedsum.)
Butsomeanalystsandthestockmarketsawthe$525millionthatthe
publiccompanyhadpaidfortheCastleastoomuch.Thestockbeganalongslide,
fallingfromabout$35asharebeforethesale,to$12monthslater.Shareholders
sued,allegingthattheCastlespurchaseprice,whichincludedroughly$175million
incashtoMr.Trumpsprivateholdingcompany,hadbeenagrossandunjustified
sweetheartdealforMr.Trump.(Helatersettledthesuit.)
Anothercrucialdeadlinecamein1998.Mr.Trumppersonallyowed$13.5
milliontoDonaldson,Lufkin&Jenrette,theinvestmentbankthathadunderwritten
theinitialpublicofferingin1995underthetermsofthatloan,hewasindangerof
defaulting,becausethestockpriceofTrumpHotelsandCasinoResortshadfallenso
low.Adefaultwouldhavemadehimlosecontrolofthecompany.Instead,thecasino
companylenthimthemoneytopaybackthebankers.Ashareholdersued,accusing
theboardofdirectorsofbreachingitsfiduciaryresponsibility.
T.H.C.R.isacasinoandentertainmentcompany,thelawsuit,filedin1999,said.
Itisnotinthebusinessofloaningmoney.Thecompanydesperatelyneeded(and
needs)cashtoshoreupitsdeterioratingfinancialcondition.(Thesuitwasdropped
in2000,shortlyafterMr.Trumppaidthecompanyback.)
Indeed,thecompanypostedlossesof$66millionin1996,$42millionin1997
and$40millionin1998.Thoselosseswouldcontinue.
Still,Mr.Trumpmademoney,receiving$1millionayearforwhatwas
essentiallyaparttimejob.In1996,hewaspaida$5millionbonus.Thepublic
companylenthim$3milliontocovercostshehadincurredwhileexploringwhether
toopenacasinoinIndiana,thenforgavetheloanwhenthestockmetpricetargets.
ThecasinocompanyleasedofficespaceinTrumpTowerinManhattan,andMr.
Trumpsotherbusinesseswerepaidtoentertainitshighendcustomers.Itwas
laterallegedinalawsuitthatatleastpartofthemoneywaspaidforbigname
performers,includingCelineDion,TonyBennettandBillyJoel,whohadappeared
atMaraLago,Mr.TrumpsresortinPalmBeach,Fla.Initsresponse,Mr.Trumps
companydidnotchallengethatallegation.
Trumpcasinosreportedpayingabout$300,000ayearinpilotcoststo
transporthighrollersinMr.Trumpsjet.Thecompanyneverdisclosedinsecurities
filingsjusthowmuchthejetwasusedforcasinopurposes.
Thepubliccompanyscollapsebeganin1999.Justthreeyearsafterspending
about$60milliontobuybacktheformerTrumpRegencyHotelandpumpingin
millionsforrenovations,thecompanyclosedit.Thecompanyspentanother$26
milliontodemolishthebuilding,takinga$125millionwriteoff.
In2000,Mr.Trumpfiredthechiefexecutiveandinstalledhimselfintherole,
promisinghewouldturnthingsaround.Thesharepricewasbythenhoveringnear
$3.
Stockpriceisalwaysaconcern,Mr.TrumptoldTheAssociatedPressatthe
time.IwasfocusedverymuchonmyManhattanrealestateoverthelastnumberof
years.Now,ImgoingtobefocusedmuchmoreinAtlanticCity.
Wehaveacompanythatsreallygotgreatpotential
2005
ThoughhehasacknowledgedmistakesinpilingcripplingdebtonTrumpHotels
andCasinoResorts,DonaldTrumphassteadfastlymaintainedthathisresortswere
thebestrunandhighestperformingcasinosinAtlanticCity.
Thecasinoshavedoneverywellfromabusinessstandpoint,hetoldPlayboy
magazinein2004.Peopleagreethattheyrewellrun,theylookgoodandcustomers
lovethem.
Inreality,therevenueatMr.Trumpscasinoshadconsistentlylaggedbehind
theircompetitorsforadecadebeforelargerforcesravagedtheindustry.Beginning
in1997,hisshareoftheAtlanticCitygamblingmarketbegantoslipfromitspeakof
30percent.
RevenuesatotherAtlanticCitycasinosrose18percentfrom1997through
2002Mr.Trumpsfellby1percent.
Competitiongrewmoreintensein2003,whentheBorgataHotelCasinoand
Spaopened.The$1.1billion,40storyresortredefinedtheconceptofanAtlantic
Cityluxurycasino.RevenuesatTrumpcasinosdroppedanother6percentinalittle
morethanayear.
HadMr.TrumpsrevenuesgrownattherateofotherAtlanticCitycasinos,his
companycouldhavemadeitsinterestpaymentsandpossiblyregisteredaprofit.But
withsaggingrevenuesandhighcosts,hiscasinoshadtoolittlemoneyfor
renovationsandimprovements,whicharevitalforhotelstoattractguests.The
publiccompanyneverloggedaprofitableyear.
Theressomethingnotrightwheneverysingleoneofyourprojectsdoesnt
workout,saidMr.Roffman,thecasinoanalyst.
Inarecentinterview,Mr.Trumpattributedhisdecliningmarketshareinthose
yearstothefactthathisthreecasinoswerecompetingwithoneanother,atacit
acknowledgmentthatheoverbuilt.
Thatwasthebadnews,hesaid.ThegoodnewsisthatIsavedalotofmoney
intermsofdealingwithcosts.
TheyeartheBorgataopened,Mr.Trumpwasalreadyaskinghisbondholdersto
acceptlessmoney,inpreparationforathirdcasinobankruptcy.Yet,atthesame
time,hemanagedtopullmoremoneyoutofthecompanyforhimself,TheTimes
found.
SincetakingTrumpHotelsandCasinoResortspublic,Mr.Trumphadbeen
boundbyacontributionagreementthatrequiredhimtoengageinthegambling
businessesonlythroughhisowncompanyandbannedhimfrompersonallyowning
morethan5percentofthestockinanyothercasinocompany.Sowhenhebought10
percentofthesharesinRivieraHotelandCasino,acompanybasedinLasVegas,
Mr.Trumpwasrequiredtograntanoptiontopurchasethesharestohispublic
corporation.
However,whenMr.TrumpsoldtheRivierasharesinApril2004,thecompany,
whichwasentitledtotheproceeds,simplycanceledtheoption,withoutexplanation.
ThecompanysdescriptionofthesaledidnotdiscloseMr.Trumpsprofitor
howhehadsoldtheshares.Butinitssecuritiesfilings,RivierareportedthatMr.
Trumphadsoldthesharesinaprivatelynegotiatedsalefor$10ashare,wellabove
thegoingprice.Thatwouldhavegeneratedagainofmorethan$1million.
AskedtoreviewthetransactionbyTheTimes,JamesD.Cox,aprofessorat
DukeUniversityLawSchoolwhospecializesincorporateandsecuritieslaw,said
suchmaterialomissionsoffactinthefilingsbytheTrumpcompanycouldhave
resultedincriminalchargesifitisknowingandwillful,thoughsuchchargesare
rare.
Ithinkthebiggestthingis,itunderstateshiscompensation,Mr.Coxsaid.
Atthetime,thecompanywasalsoaskingitslendersforabreak,andheaded
towardanotherbankruptcy.
Basically,thatsoundslikeafraudulentconveyancesaidDavidSkeel,a
bankruptcylawprofessorattheUniversityofPennsylvaniaLawSchool.
Thecompanyisthrowingawaymoney,ProfessorSkeelsaid.Itsthe
equivalentofgivingbigbonusestoyourexecutivesrightbeforeyoufilefor
bankruptcy.
Butlawyersinvolvedinthebankruptcycasesaidthetransactionhadapparently
goneunnoticed.
Inarecentinterview,Mr.Trumpsaidthathedidnotrecallthetransactionor
whytheboardhadcanceleditsoption.
Monthslater,inNovember2004,thecompanyfiledforbankruptcyprotection,
thethirdsuchtripforTrumpcasinos.
Thistimebondholderstooka$500millionloss.Mr.Trump,whosteppeddown
aschiefexecutivebutremainedchairmanoftheboard,agreedtoinvest$55million
ofhisownmoneyinthecompany,perhapshisfirstcashinvestment.Hestill
received$2millionayearunderaservicesagreement,whichincludedtheuseof
hisname.
Sharessometimestradedbelowadollar,butMr.Trumpsaidtheproblemshad
beenfixed.
Forthefirsttimeever,thiswillbeadeleveragedcompany,Mr.Trumptold
TheLasVegasSunin2005.
Noteveryoneagreed.Mr.TrumpslongtimeinvestmentbankersatDonaldson,
Lufkin&JenrettehadbackedoutofadealwithMr.Trumptoinvestinthecompany
shortlybeforethebankruptcywasfiled.Suingfor$26millioninfees,thebankers
saidincourtpapersthatthecasinoswouldbebackinbankruptcycourtwithinfive
yearsbecauseMr.Trumpsrevenueprojectionsweretoorosyandthecompanywas
stillcarryingtoomuchdebt.
TheTrumpnamedoesnotconnotehighqualityamenitiesandfirstclass
serviceinthecasinoindustry,lawyersfortheinvestmentbanksaid.Rather,the
Trumpnameisassociatedwiththefailuretopayonesdebts,acompanythathas
lostmoneyeveryyear,andpropertiesinneedofsignificantdeferredmaintenance
andlaggingbehindtheircompetitors.(Thedisputewaslatersettled.)
Theywillseehowgreatitwillbecome2009
WhenDonaldTrumphasbeenpressedonhiscasinosperformanceduringhis
presidentialcampaign,hehasrepeatedlysaidheleftAtlanticCityattherighttime.
AtlanticCityisadisaster,andIdidgreatinAtlanticCity,hesaidduringa
RepublicanPartydebatelastSeptember,accordingtoatranscript.Iknewwhento
getout.Mytimingwasgreat.AndIgotalotofcreditforit.
ThatwouldsuggestMr.Trumpwillinglyleftsometimearound2006,theyear
thatrevenuespeakedinAtlanticCityandthatPennsylvaniaalloweditsfirstcasino
toopen,adevelopmentthatmarkedthestartofarapiddownwardspiralinthecity.
Thedropoffwasexacerbatedbytherecessionthatbeganin2008.
Butinearly2009,asTrumpcasinoslurchedtowardbankruptcyforthefourth
time,Mr.Trumpwasstilltryingtohangon.Atloggerheadswithboardmembers
whohadbeenselectedbybondholdersafterthe2004bankruptcy,heofferedtobuy
allorapartofthecasinocompanybearinghisname.Hewasrebuffed,andhequit
theboardsoonafter.
TestifyinginbankruptcycourtinCamden,N.J.,Mr.Trumparguedthatthe
companycouldnotusehisname,sinceshortlybeforefilingthebankruptcyithad
stoppedpayinghimthe$166,000amonthhereceivedundertheservices
agreement.Hetestifiedthathisbrandwasworth$3billion.Healsotestifiedthathe
waspersonallynegotiatingthesettlementofalawsuitinFloridathatwouldyield
morethan$100millionforthecompany.
Andcontradictingwhathehadsaidafterthepriorbankruptcy,hetestifiedthat
thecompanysdebtloadwasstilltoohigh.
Thistime,thedebtisbeingcutbyalot,andthecompanyisreallypoised,he
said.
Therewereoddmomentsonthestand.Mr.Trump,forexample,vastly
understatedhisrole,sayinghebecameverymuchlessinvolvedwiththecompany
duringyearswhenhewasactuallychairmanoftheboardandchiefexecutive,and
wasontheboardinaveryminoritypositionduringyearswhenhehadbeen
chairman.
Asinpreviouscases,otherswarnedthatMr.Trumpspromisesshouldnotbe
trusted.ThistimeitwasCarlC.Icahn,theactivistinvestorwhohadamajorstakein
thecompany.(ThetwomennowdescribethemselvesasfriendsandMr.Icahn
supportsMr.Trumpscandidacy.)
Mr.Icahnsteamarguedthattheremainingdebtwasstillunsupportable,that
theTrumpnamewasreplaceable,andthatawindfallfromtheFloridalawsuitwas
wishfulthinking.UnderMr.Trump,thecompanyhadalonghistoryofmakingrosy
revenueprojectionsandnevermeetingthem,Mr.Icahnslawyerargued.
ButajudgeapprovedtheTrumpplanandnotedthatMr.Trumpandhis
supportershadestablishedthattheTrumpbrandisworthmillionsofdollarstothe
casinos.
Thistime,bondholdersgaveupabout$1.3billioninexchangeforcontrolofthe
company.Forthefirsttime,Mr.Trumphadnoofficialroleatthecompanyhehad
founded,andheownednomorethan10percent.
Inarecentinterview,Mr.TrumpacknowledgedthatheleftAtlanticCitywhen
hedidbecausehefailedinhisefforttobuybackthecasinos.Buthesaidthetiming
workedoutwellforhim,intheend.
In2009theywereworthahellofalotmorethantheyarenow,hesaid.
Sometimesyourebetteroffluckythangood.
TrumpMarinawassoonsoldfor$38million,lessthan10percentofwhatthe
companypaidMr.Trumpforitin1996.ThePlazawasshuttered.TheFlorida
lawsuitthatMr.Trumphadvaluedatmorethan$100millionproducednothingfor
thecompany.Mr.TrumpandhisdaughterIvankasuedthecompany,sayingtheir
brandwasbeingtarnishedbytheramshackleappearanceoftheTajMahal.
Mr.Trumpcontinuedtoearnmoneyfromthecasinos.In2011,thecasinos
reportedleasingaTrumphelicopterfor$390,000andspending$236,000for
Trumplabeledmerchandise,including$197,000forTrumpIcebottledwater.
Inretrospect,DavidHanlon,aveterancasinoexecutivewhoranMervGriffins
AtlanticCityoperationsatthetimeoftheResortsbattle,said,Mr.Trumpsucceeded
inrepeatedlyconvincinginvestors,bankersandWallStreetthathisnamehadreal
value.
Theyweresoinlovewithhimthattheycamebackasecond,thirdandfourth
time,Mr.Hanlonsaid.Theylethimstripoutassets.Itwasawfultowatch.Itwas
astonishing.IhavetogiveTrumpcreditforusinghiscelebritytimeandtimeagain.
In2014,thecasinocompanyfiledforbankruptcyprotectionforthefifthtime.
Thechiefexecutivecitedthedebtlevelafterthe2009bankruptcyastheprimary
reason.
Foratime,Mr.Trumplentaglamoroussheentothefadedresortcity.Butsome
ofhisformerinvestorsnolongerseethevalue.
PeopleunderestimatedDonaldTrumpsabilitytopillagethecompany,said
SebastianPignatello,aprivateinvestorwhoatonetimeheldstockintheTrump
casinosworthmorethan$500,000.Hedrovethesecompaniesintobankruptcyby
hismismanagement,thedebtandhispillaging.
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