University of Tennessee, Knoxville TRACE: Tennessee Research and Creative Exchange Chapter 11 Bankruptcy Case Studies College of Law Student Work June 2017 Trump Entertainment Resorts: Three Bankruptcies and the Failure to Make Atlantic City Great Again Ryan Gallagher Andrew Hale Follow this and additional works at: https://trace.tennessee.edu/utk_studlawbankruptcy Part of the Bankruptcy Law Commons Recommended Citation Gallagher, Ryan and Hale, Andrew, "Trump Entertainment Resorts: Three Bankruptcies and the Failure to Make Atlantic City Great Again" (2017). Chapter 11 Bankruptcy Case Studies. https://trace.tennessee.edu/utk_studlawbankruptcy/47 This Article is brought to you for free and open access by the College of Law Student Work at TRACE: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Chapter 11 Bankruptcy Case Studies by an authorized administrator of TRACE: Tennessee Research and Creative Exchange. 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Trump Entertainment Resorts: Three Bankruptcies and the Failure to Make Atlantic City Great Again Workouts and Reorganizations – Professor George Kuney Spring 2017 Ryan Gallagher and Andrew Hale 1 Table of Contents 1 Introduction and Overview: The Gamble on Atlantic City and a History of Trump Entertainment Resorts ..................................................................................................................... 5 1.1 Background ...................................................................................................................... 5 2 Trump Hotels & Casino Resorts, Inc. 2004 Bankruptcy: Uncovering the Sweetheart Deal .. 8 2.1 THCR 2004 Organizational, Operational, and Capital Structures ................................... 8 2.2 Triggering Events of the 2004 Bankruptcy .................................................................... 10 2.3 Failed Investment Negotiations with DLJ Merchant Bank ............................................ 11 2.4 First Plan Filing; Uncovering the “Sweetheart Deal;” Confirming a Plan .................... 12 3 Trump Entertainment Resorts, Inc. 2009 Bankruptcy: Here We Go Again. ........................ 15 3.1 Changes in THCR Capital Structure .............................................................................. 15 3.2 Triggering Events of the 2009 Bankruptcy .................................................................... 16 3.3 Bankruptcy Petition and Commencement of the Case ................................................... 17 First Day Motions ................................................................................................... 17 3.4 The Plan Carousel .......................................................................................................... 18 “The Insider Plan”: The Debtor’s First Joint Plan .................................................. 18 Ad Hoc Committee Objection; Appointment of Examiner .................................... 19 3.5 Ad Hoc Committee Proposed Plan................................................................................. 20 Debtors’ Objection .................................................................................................. 21 3.6 Ad Hoc Committee Motion for Compliance with Bankruptcy Procedure ..................... 21 3.7 Approval of Both Proposed Disclosure Statements ....................................................... 22 3.8 Donald Trump Switches Teams ..................................................................................... 23 Beal Bank’s Motion to File a Competing Plan ....................................................... 24 3.9 Enter Carl Icahn, Savior ................................................................................................. 26 3.10 Trump vs. Icahn: Competing Personalities and Plans .................................................... 27 Ad Hoc Committee’s Proposals .............................................................................. 27 Beal and Icahn Key Proposals ................................................................................ 28 3.11 Ad Hoc Plan wins ........................................................................................................... 29 4 Trump Entertainment Resorts, Inc. 2014 Bankruptcy: Taj and Plaza Left Behind .............. 29 4.1 More on Atlantic City’s Market Decline........................................................................ 29 4.2 Triggering Events of the 2014 Bankruptcy .................................................................... 30 4.3 2014 Organizational, Operational, and Capital Structures of Trump Entertainment ..... 32 Detailed Prepetition Overview ................................................................................ 32 2 Revisiting the First Lien Agreement and Terms ..................................................... 35 Critical Prepetition Third-Party and Creditor Litigation ........................................ 35 4.4 Bankruptcy Petitions and Commencement of the Case ................................................. 39 TER Petitions for Chapter 11 Bankruptcy .............................................................. 39 First Day Motions ................................................................................................... 39 The Cash Collateral Motion .................................................................................... 41 Appointment of the Official Committee of Unsecured Creditors ........................... 43 Objections to First Day Motions and Proposed Orders .......................................... 44 Atlantic City Exempted from the Automatic Stay .................................................. 47 First Day Final Orders ............................................................................................ 50 The Cash Collateral Order ...................................................................................... 52 UNITEHERE Local 54 and the Taj Mahal Collective Bargaining Agreement ...... 53 Debtors’ Schedules and Statements of Financial Affairs ....................................... 56 4.5 The First Plan Proposal: Icahn’s Big Opportunity ......................................................... 61 The Plan and Disclosure Statement ........................................................................ 61 Plan and Disclosure Statement Objections ............................................................. 65 Unsecured Creditors’ Committee Objection ........................................................... 66 Judge Gross’s CBA Order Reaches the Third Circuit Court of Appeals ................ 69 4.6 The Second Plan Proposal: Crumbs for Unsecured Creditors ....................................... 71 The Amended Plan and Disclosure Statement ........................................................ 71 The Reorganized Debtors’ Financial Forecast ........................................................ 72 Unsecured Creditors’ Objection to the Second Proposal ........................................ 74 Trump Entertainment’s Motion for Authorization of Post-Petition Financing ...... 76 Trump Entertainment’s Settlement with the Online Gaming Companies .............. 79 4.7 The Final Plan Proposal: Little Hope for the Taj Mahal ................................................ 80 The Plan and Disclosure Statement ........................................................................ 80 Treatment of Claims under the Final Plan .............................................................. 81 Objections to the Third Statement and Plan Proposal ............................................ 82 Committee Moves for Standing to Prosecute Claims against Debtors’ Assets ...... 86 OCC Member Thermal Energy’s Settlement Compromise .................................... 89 Settlement of Levine Staller and Trump Marks Disputes ....................................... 91 Approval of the Plan and Disclosure Statement ..................................................... 93 3 4.8 Plan Confirmation Order; Findings of Fact and Conclusions of Law ........................... 94 General Entitlements and Obligations .................................................................... 94 The Distribution Trust and Professional Fee Escrow Account ............................... 95 Executory Contracts and Unexpired Leases ........................................................... 97 5 The Aftermath: Casino Employees Lose, Industry Moves Forward .................................... 98 4 1 Introduction and Overview: The Gamble on Atlantic City and a History of Trump Entertainment Resorts “Legalized gambling was supposed to rescue the city from its obsolescence...”1 New Jersey voters approved casino gambling in 1976, and locals celebrated the promise of economic revitalization.2 Atlantic City, then only one of two destinations for legal gaming in the United States, rapidly evolved into the go-to location for east coast tables and slots. Nine Casinos opened within four years, and Atlantic City enjoyed a surge in tourism, employment, and tax revenue.3 Fifteen casinos operated on the New Jersey coast beginning in 1980—over half have since closed their doors.4 The story of Trump Entertainment Resorts spans over three decades and has recently concluded with the 2017 closure of its last, and greatest, casino.5 The foundation of Trump Entertainment was laid in the earliest days of what was once a promising opportunity for investors, but the casinos of Trump Entertainment Resorts would fall victim to poor marketing