Donald Trump: The Master of Chapter 11 Bankruptcy
Many businesses file for chapter 11 bankruptcy, Donald Trump’s businesses seem to have this step built into their plan. With 6 chapter 11 bankruptcies under his built, Trump has shown a willingness to throw ideas at the wall to see what sticks. Let’s take a look at those ideas that did NOT stick.
First, the Basics of Chapter 11 Bankruptcy
Unlike chapter 7, after filing for chapter 11 bankruptcy, a trustee is not automatically appointed by the court. A trustee may be appointed if there is sufficient evidence that the debtor has committed less than savory acts such as fraud and gross incompetence. Chapter 11 bankruptcy is often referred to as “reorganization” of debt. If the creditor and debtor can agree to a plan, the business can continue to operate and pay back debt in the future. Reports show that Chapter 11 bankruptcy filed by businesses is successful 10% – 15% of the time.
Bankruptcy #1 – Trump Taj Mahal
The Trumps paid $1.2 billion to build the hotel and resort. The plan was to use Trump products to outfit the place. Unfortunately, no one wanted Trump water, towels, etc. In 1991, chapter 11 bankruptcy was filled in an attempt to maintain control. Trump was able to hang on to the property until 2015 when Carl Icahn took controlling interest eventually selling to the Seminole Indians for $50 million (4 cents on the dollar).
Bankruptcy #2 – Trump Castel Hotel and Casino
This property had trouble paying the bills after Trump opened the Trump Taj Mahal. Maybe it is not wise to compete with yourself…In 1992, Trump bondholders signed a deal to accept equity and preferred stock in lieu of the debt.
Bankruptcy #3 – Trump Plaza Hotel
1992 was a rough year for Donald Trump. The Trump Plaza Hotel went bankrupt which led to the transfer of 49% in equity to Citi Bank. Trump was an estimated $550 million in the red at the time of the filing.
Bankruptcy #4 – Trump Plaza Casino
This property filed along with the Trump Plaza Hotel. Over $100 million in liabilities have been reported for this filing.
Bankruptcy #5 – Trump Hotels and Casino Resorts
Perhaps this is one of the largest screw ups by Trump. Trump Hotels and Casino resorts acts as the parent company to three of the afore mentions properties. In 2004, this holding company filed for chapter 11 bankruptcy with over…wait for it…$1.8 billion (with a ‘b’) in debt. Trump was stripped of control and his title of CEO only to emerge with a new company called Trump Entertainment Resorts.
Bankruptcy #6 Trump Entertainment Resorts
Trump Entertainment Resorts (TER) is the same group that ran Trump Hotels and Casinos into the ground for all intents and purposes. To be fair, in 2009, tons of businesses were having trouble paying the bills due to the recession and TER already had debt from previous failed ventures. When TER filed for chapter 11 bankruptcy, they were $1.2 billion in debt.
If you or your business is upside down in your loans and you are considering filing for bankruptcy under chapter 11, you need help. This is an enormously complex process and you need someone to protect you from creditors and guide you. Contact Elias Dsouza for a free consultation today!