ATLANTIC CITY, N.J. -- Two of Donald Trump's casinos filed prepackaged bankruptcy plans Monday after winning bondholders' approval of plans to save interest expense.
The Trump Castle and Trump Plaza took the same route as the Taj Mahal, which emerged from reorganization under Chapter 11 of the federal bankruptcy code within weeks of its filing last year.
Both casinos filed for Chapter 11 in U.S. Bankruptcy Court in Camden after holders of 77 percent of the Castle debt, and 97 percent of the Plaza's, approved the respective plans. The filing had been expected for several months.
Cash-flow problems at the three casinos since the glitzy Taj opened in April 1990 have been a major factor in Trump's financial troubles.
The Castle, which has had the most difficulty generating enough cash to meet its costs, submitted a debt-for-equity swap similar to the one used by the Taj. The Trump Organization gives up a 50 percent share of the casinos stock to the bondholders, who exchange debt securities paying 13 percent interest for bonds at 9 percent.
Under the deal, some of the interest can be paid in additional bonds rather than cash.
The Plaza bondholders agreed to exchange $250 million in 12 percent bonds for $225 million at 12 percent, plus $75 million in preferred stock.
While the agreements include management fees for Trump, they also allow bondholders to oust him if the financial problems continue and include some restrictions on what he can do.
The Castle and Plaza, both operating under heavy debt loads, saw revenues decline sharply when the glitzy Taj opened in April 1990. The three casinos were also hurt by stagnant revenues in Atlantic City because of the recession and the Persian Gulf War.
The industry and the three Trump casinos have been rebounding recently with monthly gross revenues up significantly over last year's figures.