Trump Taj Mahal Appears Ready to Close between November 13 and November 27
The Trump Taj Mahal could be the next Atlantic City casino to close. The east coast gambling destination has has four of its twelve casinos close in 2014, but the economic troubles might not be over.
Trump Entertainment Resorts recently filed for bankruptcy. The company also plans to close Trump Plaza on September 16, which will bring the number of closed Atlantic City casinos to four. The closing of Trump Plaza was bound to bring speculation about the future of Trump Taj Mahal, so it is no surprise to hear talk of the casino’s closing. The speculation grew when it was learned that the latest bankruptcy filing by Trump Entertainment was in relation to Trump Taj Mahal itself.
According to an Associated Press story, the casino could close its doors as early as November. The contents of the bankruptcy filing are bleak, leading anyone who sees them to assume a closing is imminent.
Liabilities Far in Excess of Assets
The liabilities faced by the struggling casino are between $100 million and $500 million, while the operation is said to have no more than $50,000 in assets. The company wrote of itself in the filing, “Debtors expect that the Taj Mahal will close on or shortly after Nov. 13, 2014, and that all operating units will be terminated between Nov. 13, 2014, and Nov. 27, 2014.”
To escape that fate, the parent company hopes to cut expenses, negotiate a new deal with the main union working in the operation, and generate “substantial revenue increases“. That is a tall order for an operation planning to close its doors in a little over two months.
Struggling Market
The prospective closing of Trump Taj Mahal is just the latest bad news for the casino industry of Atlantic City. In 2006, Atlantic City pulled in $5.4 billion in revenues. By 2013, the city was collecting just over half that sum, with $2.86 billion in winnings. That is a huge decline for the 12 casinos which were operating to begin 2014. When a business suddenly begins making half of what it did a short time before, that is bound to lead to bankruptcy. Most operations plan for steady income. When they have borrowed money to expand operations, the debt burden becomes too much to sustain when the revenue stream dries up.
Atlantic City’s troubles come from a number of factors. Pennsylvania legalized casino-style gambling in its racetracks in 2004. Land-based casinos built in the Philadelphia area began to soak up customers from Pennsylvania, New York, and North Jersey. Market saturation combined with a bad economy in the wake of the Global Recession, while Hurricane Sandy hit the casino industry at a time it could least afford it.
Local Gaming Companies Not Strong
Outside economic issues persisted, too. Caesars Entertainment was the biggest operator in the city, with 4 of the 12 casinos coming into 2014. But Caesars Entertainment has never recovered from a leveraged buyout in January 2008 which came a few months before the real estate market collapsed, upsetting all economic projections. Caesars Entertainment faces a debt between $22 billion and $23 billion, which caused it to shut down Showboat Casino–despite consistent profits.
Trump Entertainment Resorts has had perennial economic troubles, too. The company built by Donald Trump has gone through successive waves of bankruptcy. A bankruptcy filing in 2009 allowed outside interests to push Donald Trump out of his own company, though the real estate developer and reality TV star still maintains a 10% stake in the company. Despite that, Donald Trump appears to believe his old company is dead in the water, because he recently sued to have his name taken off the Trump Plaza and Trump Taj Mahal–the licensing deal which gives him a 10% interest in the parent company.
What to Do about Atlantic City
With Atlantic City’s economy falling apart at the seams, New Jersey politicians continue to present their ideas for the future. State Senator Ray Lesniak, long an advocate for the gambling community, recently wrote in an open letter, “The continued decline of casino gaming in [Atlantic City], not just the latest casualty, makes the case for my proposal to reinvest billions…to reinvent it as a tourist destination with casinos, not just a casino destination.”
That is the plan of Atlantic City Mayor Don Guardian, who is seeking to transition the city to less of a reliance on gambling. Instead, he wants the Boardwalk to become a destination for non-gaming tourists. The idea is to operate boutique hotels instead of Vegas-style integrated resorts. Shopping areas and non-gaming forms of entertainment are to be encouraged to locate in Atlantic City.
Steve Sweeney’s North Jersey Plan
Steve Sweeney, President of the New Jersey State Senate, has a more radical idea: fund Atlantic City’s transition with a North Jersey casino. In February 2011, Governror Chris Christie pledged to give Atlantic City 5 years to reform and recalibrate. Now, Sweeney says that 5-year window is too rigid, and waiting until 2016 to fix the problem will give New York and Pennsylvania a head start in the competition for new costumers in the population centers adjacent to North Jersey.
Sweeney’s idea is to build a casino in the Meadowlands of North Jersey, the closest possible location to New York City. With a casino nearer than the Orange County casinos proposed for New York by Genting Limited and Caesars Entertainment, the North Jersey casino would presumably be a financial can’t-miss. Sweeney would like to tax the North Jersey casino in such a way to collect over $1 billion, which would be channeled to Atlantic City to aid in the transition to a non-gaming economy.
It should be noted that all these proposed initiatives would continue to support whatever casino industry remains in Atlantic City beyond 2014. The closings can be seen as market corrections, so the remaining 7 casinos should be able to sustain themselves, because customers of the other 5 operations presumably would find new local places to gamble.
