Carl Icahn Backs Out of Trump Taj Mahal Deal, but Funds Continuing Operation
Distressed Atlantic City casino Trump Taj Mahal inched a bit closer toward becoming the fifth AC casino to close in an ongoing economic contraction, following a breakdown of talks between union and state officials and billionaire investor Carl Icahn.
However, Icahn pledged $20 million to keep the casino open in the short term, staving off a closure which was originally scheduled for today. That comes despite Icahn being the target of attacks by state and union officials after a $100 million financing deal to keep the Taj open fell through earlier this week.
Though the Taj Mahal’s doors remain open, its long-term prospects remain poor. Icahn has insisted that the casino’s unionized workers accept reduced compensation as part of a deal, while the state has been loathe to grant Icahn a generous tax-benefits package while the casino’s workers suffer a trimming of benefits. Icahn has demanded roughly $14 million in concessions from the casino’s roughly 3,000 workers, which has led the union (which represents some but not all of the casino’s workers) and the state to file labor complaints against Icahn.
Despite that, however, the two sides appear to have come close to reaching an agreement before talks collapsed on Thursday. If no new labor deal is reached, the Taj Mahal would join the Atlantic Club, Showboat, Revel and Trump Plaza as victims of Atlantic City’s continuing economic downturn.
In response to the attacks, Icahn took the unusual step of publicly releasing the text of a letter he sent to Trump Entertainment Resorts, Inc. CEO Robert F. Griffin. The text of the letter (below), shows Icahn defending himself against claims that he is “anti union,” and notes how extremely difficult the economic circumstances facing both Trump Entertainment Resorts (the Taj’s parent company), and Atlantic City itself.
Wrote Icahn, in the letter’s most telling declaration, “But Trump Entertainment Resorts, Inc. is one of the most distressed companies I have ever come across in my 50+ years of investing. The company’s hometown of Atlantic City is in the midst of an unprecedented crisis.”
Whether or not a deal can be reached that keeps eight casinos operating in Atlantic City remains to be seen, though as evidenced by the statements from all parties, negotiations are continuing.
Here’s the text of the highly unusual Carl Icahn letter:
I received your letter requesting further aid and assistance in your attempts to keep the Trump Taj Mahal open, and I would like to respond.
I do not typically shy away from a challenge. In fact, I take great pride in my ability to successfully rebuild failing businesses. As you correctly pointed out, a few years ago I took a chance at the Tropicana by investing when others would not, and today the Tropicana is a profitable, viable casino that provides stable employment for almost 3,000 workers. In addition to gaming, I’ve also had tremendous success
rehabilitating businesses in other industries, including oil and gas, metals and real estate.
But Trump Entertainment Resorts, Inc. is one of the most distressed companies I have ever come across in my 50+ years of investing. The company’s hometown of Atlantic City is in the midst of an unprecedented crisis. Intense competition from surrounding markets is steadily eroding gaming revenues for the city’s casinos. At the same time, relative to those surrounding markets, the costs of operating a casino in Atlantic City continue to escalate. As a result, four local casinos shuttered in 2014, and a once vibrant Atlantic City institution, your Taj Mahal, loses almost $10 million every month.
Despite all of that, and in part because of the tremendous integrity you have displayed throughout this difficult and arduous process, I took your letter to heart. I worked tirelessly with my team over the last few days – reviewing and re-reviewing the numbers you provided us, trying to find some way to help you keep the Taj operating. I also had countless discussions with representatives of the State and the Union, and at one point, I genuinely believed we were close to a global settlement. But ultimately, even though I committed to inject another $100 million of capital into the Taj, we could not get a deal done.
Now, I want to be clear that I am in no way “anti-union” (as some may suggest). I grew up in one of the roughest neighborhoods in Queens, and I’ve worked hard every day of my life to get to where I am. So I respect people who want the opportunity to work hard and better their lot in life, which is why I often have a good relationship with labor leaders at the companies I own. It’s also the reason why, despite some questionable decision-making from this Union’s leadership over the last few months, I remain hopeful that I will be able to reach a deal with them.
Even though I believe that Atlantic City will be great again someday, many people would still argue that it would be a better financial decision for me to let the Taj close and wait to see whether a global settlement can be reached. But I cannot be so callous as to let 3,000 hardworking people lose their jobs while a global settlement with the State and Union, which would enable us to turn the Taj around, as we’ve done with so many other failing businesses, remains a possibility. Therefore, even though I have no assurance that the State will provide aid or that the Union will drop its appeal, I will send you a commitment letter to provide you with up to $20 million of additional financing (in accordance with your budget and subject to the terms and conditions contained therein) to keep the Taj operating throughout the bankruptcy proceedings, and I will also commit to work collaboratively with the State, the City and the Union to try to forge a global settlement that will bring real stability to the Taj and its employees.
Carl C. Icahn
Icahn Enterprises L.P.