Antischism
06-11-2016, 11:22 AM
This is a long read. http://www.nytimes.com/2016/06/12/nyregion/donald-trump-atlantic-city.html
His audacious personality and opulent properties brought attention — and countless players — to Atlantic City as it sought to overtake Las Vegas as the country’s gambling capital. But a close examination of regulatory reviews, court records and security filings by The New York Times leaves little doubt that Mr. Trump’s casino business was a protracted failure. Though he now says his casinos were overtaken by the same tidal wave that eventually slammed this seaside city’s gambling industry, in reality he was failing in Atlantic City long before Atlantic City itself was failing.
But even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen.
Mr. Trump told the commission in 1988 that he could rein in expenses, because conventional lenders were lining up to give him money at low interest rates. He said he abhorred junk bonds, which were then popular, because they carried a bigger risk of default and thus came with higher interest rates.
Within months, he reversed course, issuing $675 million worth of junk bonds, with a 14 percent interest rate, to finish construction and get the Taj open. In recent interviews, Mr. Trump has said that with each financing he routinely took money out of the casinos to invest in Manhattan real estate. Total debt on the Taj exceeded $820 million.
Less than two weeks before the casino opened, Marvin B. Roffman, a casino analyst at Janney Montgomery Scott, an investment firm based in Philadelphia, told The Wall Street Journal that the Taj would need to reap $1.3 million a day just to make its interest payments, a sum no casino had ever achieved.
“The market just isn’t there,” Mr. Roffman told The Journal.
Mr. Trump retaliated, demanding that Janney Montgomery Scott fire Mr. Roffman. It did.
His agreements with lenders and the two casino bankruptcies in those years still left Mr. Trump personally responsible for more than $100 million in debt, and his agreements had only delayed the day of reckoning to June 30, 1995.
He dealt with that danger by first shifting much of his personal debt onto his casinos, then onto a new group: shareholders.
Step 1 came in 1993, when his company sold more junk bonds, adding another $100 million in debt to the Trump Plaza casino. More than half of the new money went to pay off Mr. Trump’s unrelated personal loans.
Then, in June 1995, with the risk of being forced into bankruptcy just weeks away, Mr. Trump shifted ownership of the Plaza casino to a new, publicly traded company: Trump Hotels and Casino Resorts. In the initial public offering, 10 million shares were sold at $14. At the same time, the company also sold another $155 million in junk bonds, at a 15.5 percent interest rate.
...
Indeed, the company posted losses of $66 million in 1996, $42 million in 1997 and $40 million in 1998. Those losses would continue.
Still, Mr. Trump made money, receiving $1 million a year for what was essentially a part-time job. In 1996, he was paid a $5 million bonus. The public company lent him $3 million to cover costs he had incurred while exploring whether to open a casino in Indiana, then forgave the loan when the stock met price targets.
Mr. Trump now says he looks back on the period as his golden era in the casino business.
“Early on, I took a lot of money out of the casinos with the financings and the things we do,” he said in a recent interview. “Atlantic City was a very good cash cow for me for a long time.”
Others were hurt.
“He helped expand Atlantic City, but he just did not put the equity into the projects he should have to keep them solvent,” said H. Steven Norton, a casino consultant and a former casino executive at Resorts International. “When he went bankrupt, he not only cost bondholders money, but he hurt a lot of small businesses that helped him construct the Taj Mahal.”
Beth Rosser of West Chester, Pa., is still bitter over what happened to her father, whose company Triad Building Specialties nearly collapsed when Mr. Trump took the Taj into bankruptcy. It took three years to recover any money owed for his work on the casino, she said, and her father received only 30 cents on the dollar.
“Trump crawled his way to the top on the back of little guys, one of them being my father,” said Ms. Rosser, who runs Triad today. “He had no regard for thousands of men and women who worked on those projects. He says he’ll make America great again, but his past shows the complete opposite of that.”
Truly a conservative champion for small businesses. He's looking out for the little guys!
His audacious personality and opulent properties brought attention — and countless players — to Atlantic City as it sought to overtake Las Vegas as the country’s gambling capital. But a close examination of regulatory reviews, court records and security filings by The New York Times leaves little doubt that Mr. Trump’s casino business was a protracted failure. Though he now says his casinos were overtaken by the same tidal wave that eventually slammed this seaside city’s gambling industry, in reality he was failing in Atlantic City long before Atlantic City itself was failing.
But even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen.
Mr. Trump told the commission in 1988 that he could rein in expenses, because conventional lenders were lining up to give him money at low interest rates. He said he abhorred junk bonds, which were then popular, because they carried a bigger risk of default and thus came with higher interest rates.
Within months, he reversed course, issuing $675 million worth of junk bonds, with a 14 percent interest rate, to finish construction and get the Taj open. In recent interviews, Mr. Trump has said that with each financing he routinely took money out of the casinos to invest in Manhattan real estate. Total debt on the Taj exceeded $820 million.
Less than two weeks before the casino opened, Marvin B. Roffman, a casino analyst at Janney Montgomery Scott, an investment firm based in Philadelphia, told The Wall Street Journal that the Taj would need to reap $1.3 million a day just to make its interest payments, a sum no casino had ever achieved.
“The market just isn’t there,” Mr. Roffman told The Journal.
Mr. Trump retaliated, demanding that Janney Montgomery Scott fire Mr. Roffman. It did.
His agreements with lenders and the two casino bankruptcies in those years still left Mr. Trump personally responsible for more than $100 million in debt, and his agreements had only delayed the day of reckoning to June 30, 1995.
He dealt with that danger by first shifting much of his personal debt onto his casinos, then onto a new group: shareholders.
Step 1 came in 1993, when his company sold more junk bonds, adding another $100 million in debt to the Trump Plaza casino. More than half of the new money went to pay off Mr. Trump’s unrelated personal loans.
Then, in June 1995, with the risk of being forced into bankruptcy just weeks away, Mr. Trump shifted ownership of the Plaza casino to a new, publicly traded company: Trump Hotels and Casino Resorts. In the initial public offering, 10 million shares were sold at $14. At the same time, the company also sold another $155 million in junk bonds, at a 15.5 percent interest rate.
...
Indeed, the company posted losses of $66 million in 1996, $42 million in 1997 and $40 million in 1998. Those losses would continue.
Still, Mr. Trump made money, receiving $1 million a year for what was essentially a part-time job. In 1996, he was paid a $5 million bonus. The public company lent him $3 million to cover costs he had incurred while exploring whether to open a casino in Indiana, then forgave the loan when the stock met price targets.
Mr. Trump now says he looks back on the period as his golden era in the casino business.
“Early on, I took a lot of money out of the casinos with the financings and the things we do,” he said in a recent interview. “Atlantic City was a very good cash cow for me for a long time.”
Others were hurt.
“He helped expand Atlantic City, but he just did not put the equity into the projects he should have to keep them solvent,” said H. Steven Norton, a casino consultant and a former casino executive at Resorts International. “When he went bankrupt, he not only cost bondholders money, but he hurt a lot of small businesses that helped him construct the Taj Mahal.”
Beth Rosser of West Chester, Pa., is still bitter over what happened to her father, whose company Triad Building Specialties nearly collapsed when Mr. Trump took the Taj into bankruptcy. It took three years to recover any money owed for his work on the casino, she said, and her father received only 30 cents on the dollar.
“Trump crawled his way to the top on the back of little guys, one of them being my father,” said Ms. Rosser, who runs Triad today. “He had no regard for thousands of men and women who worked on those projects. He says he’ll make America great again, but his past shows the complete opposite of that.”
Truly a conservative champion for small businesses. He's looking out for the little guys!