It just keeps getting worse for Atlantic City. The once-popular gambling hub of the east coast has been in a death spiral this year and that spiral is getting deeper and deeper. The latest: Trump Entertainment Resorts has filed for Chapter 11 bankruptcy and is saying that it may have to close the Trump Taj Mahal casino.
Contrary to what many people think, Chapter 11 bankruptcy does not mean that a company just goes out of the business. On the contrary, it is a protection meant to try to save a company from going under. It is not easy, though. In Chapter 11, the debtor typically retains control of its business, though it hands many major financial decisions over to the bankruptcy court. In the meantime, the debtor has the opportunity to cancel contracts that it can no longer honor and restructure other financial obligations. It is a not a simple “get out of jail free” card – after going through Chapter 11, it will be harder for a company to get loans, receive favorable debt terms, etc.
But right now, it certainly looks like Trump Entertainment is in trouble. According to the Press of Atlantic City, the company’s attorney told a bankruptcy court judge today that while it is negotiating with its main lender and its labor union, it is going to need major concessions from those parties to stay afloat. He said the company is burning through cash and with the economic struggles Atlantic City has suffered through of late, it has been unable to find other sources of financing. “Obviously nobody can be forced to give us a loan,” the Press quoted him as saying. “The runway here is relatively short.”
How short? If nothing can be figured out to relieve Trump Entertainment Resorts’ financial burden, it will close around November 13th of this year. The Trump Plaza, also in Atlantic City, is scheduled to close next week. Three other Atlantic City casinos – Showboat, Atlantic Club, and the two-year old Revel – have already shuttered their doors. The former gambling mecca began 2014 with twelve casinos. If the Taj goes down, it will soon have just seven.
Atlantic City’s troubles stem largely from increased competition from neighboring states. The city was once the only viable gambling destination in the mid-Atlantic; tourists and gamblers would travel from hours away to visit the casinos and take in the sights on the famous Boardwalk. But now, residents of Pennsylvania, Delaware, Maryland, New York, and Connecticut all have major casinos that are more convenient to them, so there is not much need to trek out to Atlantic City. On top of that, Atlantic City has rarely been held up as the epitome of cleanliness and safety, so why go there when there are gleaming new casinos close to home?
Last year’s legalization of online gambling in New Jersey was an effort to help the Atlantic City casinos make up some of the revenue they have been losing to out-of-state casinos, but it may be too little too late. Governor Chris Christie also issued a Directive to lift the state’s ban on sports betting this week, another way to try to inject more cash flow into the casinos. It may help, but it also may be too late for the Taj Mahal, once the center of the poker world in Atlantic City.