WILMINGTON, Del. – A Delaware bankruptcy judge on Thursday approved the Chapter 11 reorganization plan of Trump Entertainment Resorts, which gives billionaire investor Carl Icahn control of the reorganized company and its Taj Mahal casino in Atlantic City, New Jersey.
As Trump’s senior secured lender, Icahn is owed more than $290 million. The plan approved by Judge Kevin Gross calls for Icahn to exchange his debt for all of the reorganized company’s stock.
Icahn has said he intends to keep open and refurbish the Taj, which employs some 3,000 people, and to retain its iconic Trump brand.
“We hope to emerge with a healthy balance sheet, a solid platform from which the Trump Taj Mahal can emerge as the leading gaming destination in Atlantic City,” Trump Entertainment attorney Erez Gilad told the judge.
Trump Entertainment’s bankruptcy filing last September came amid ongoing struggles in the gambling industry that saw four of Atlantic City’s 12 casinos close last year, including the Trump Plaza.
In return for the official creditors committee’s backing of the reorganization plan, entities controlled by Icahn agreed to make $3.5 million available to general unsecured creditors, who otherwise stood to gain far less than that. Icahn also has committed to provide up to $82.5 million to help the company exit bankruptcy.
Creditors voting for the plan must also agree to liability releases protecting the Trump Entertainment and Icahn entities from future litigation.
But the plan’s fate hinges on a federal appeals court panel rejecting a labour union’s challenge to Gross’s decision last year to terminate an expired contract with Taj Mahal workers. That allowed Trump Entertainment to shed costly pension and health care obligations. If Gross’s ruling is overturned, Icahn has the option to walk away from the restructuring agreement.
“We do believe we will have ample liquidity to operate while we wait for a decision on the appeal,” said William Hardie, a financial adviser working with Trump Entertainment.
Hardie also said that the company, which once said its successful reorganization was contingent on some $150 million in state and local tax breaks from New Jersey officials, expects to be able to save an equal amount over the next several years through settlements or litigation of property tax issues in Atlantic City.