When it opened in Atlantic City, N.J., on April 2, 1990, the Trump Taj Mahal was the largest casino in the world with 120,000 square feet of gaming space. Donald Trump billed the casino as the “Eighth Wonder of the World”. The grand opening itself lasted for three days. However, all was not well with the casino’s financial picture.
Original ownership: The property was first owned and developed by Resorts International, with construction of the huge edifice beginning in 1983. The principal of Resorts International died in 1986 making the company a takeover target. Enter Donald Trump who bought a controlling stake in Resorts International for about $79 million.
Finishing Construction: With Trump as the new principal, Resorts International needed to raise another $550 million to finish construction. Various financial problems pushed Resorts International to the brink of bankruptcy. Trump attempted to buy out the remaining interests in Resorts International, but was outbid by Merv Griffin, a television producer. After some legal wrangling, Trump agreed to buy the Trump Taj Mahal from Griffin and Resorts International for $273 million. Trump then sought to raise another $675 million needed to finance the buyout and finish construction. Most of this money came in the form of junk bonds paying 14% interest. Construction did finish, and the casino opened with a lot of fanfare on April 2, 1990.
The Prearranged Bankruptcy: Less than two years after the opening, the Trump Taj Mahal went through a prearranged bankruptcy in which the details of settlement were primarily worked out before the filing took place. In exchange for more favorable financing terms, including a lower interest rate and longer duration, the bondholders received a 50% stake in the casino.
Money Laundering: In 1992, a U.S. Senate Subcommittee issued a report linking the Trump Taj Mahal to organized crime. Over its 16 years of operation, the Trump Taj Mahal was cited numerous times by the U.S. Department of the Treasury for having inadequate money laundering controls, and was fined $10 million in February, 2015, after a long investigation. It was at that time the highest federal penalty ever levied against a U.S. casino. As a part of the settlement, the casino admitted to multiple violations and agreed to having external audits to verify compliance.
Going Public: Still needing money to keep in business, Trump created the Trump Hotels & Casino Resorts company to take the Trump Taj Mahal public and bring in additional shareholders. In the process Trump Hotels & Casino Resorts acquired the Trump Taj Mahal then valued at about $890 million. The name of the public company was changed to Trump Entertainment Resorts.
Second Bankruptcy: Owing to a labor dispute in which Trump Entertainment Resorts demanded concessions from its unions, the firm filed for bankruptcy and announced that it would close the Trump Taj Mahal on December 20, 2014. Two days before closing, an agreement with the unions was reached, and the casino remained open. Businessman Carl Icahn then entered the bankruptcy picture and provided $20 million towards the financial shortfall in exchange for a controlling stake in Trump Entertainment Resorts. In February, 2016, Trump Entertainment Resorts exited bankruptcy and became a subsidiary of Icahn Enterprises.
Third Change of Ownership: The labor disputes continued, and the Trump Taj Mahal was finally shut down for good on October 10, 2016. On March 1, 2017, Hard Rock International entered into negotiations to buy the Trump Taj Mahal from Carl Icahn for about $50 million. Hard Rock invested another $325 million to refurbish the casino and reopened the property as the Hard Rock Hotel & Casino Atlantic City in June, 2018.
Conclusion: From the late 1980’s when he first acquired the property, Trump’s stake in the Trump Taj Mahal rose through the years to over $1 billion – much of that amount was provided by outside financing. After two bankruptcies and three name changes, Hard Rock International (owned by the Seminole Indian Tribe) bought the whole package in 2017 for about $50 million or about 4.8% of the original stake – less than 5 cents on the dollar.
Sources: Wikipedia, Hard Rock Hotel & Casino Atlantic City;
Chicago Tribune, May 9, 2017, Trump’s Taj Mahal – the ‘8th wonder of the world’—sold for pennies on the dollar, by Wayne Parry, Associated Press.