A Source Told the New York Daily News, “Carl woke up and changed his mind”
Carl Icahn and the Trump Taj Mahal’s union workers continue to negotiate in the 11th hour as a December 20 close date looms. Icahn wrote a letter on Dec. 18 to Trump Entertainments CEO Robert Griffin, saying he plans to keep trying to come to a bargain with the unionized workers at the bankrupt Trump Entertainment resort.
In the open letter, Icahn wrote, “I am in no way anti-union. I remain hopeful that I will be able to reach a deal with them.” In the letter, Icahn stated that he would provide $20 million in additional financing to keep the Trump Taj Mahal operating. This seemed to indicate that the previous December 20 deadline for closure might be extended, as it was suggested might happen in bankruptcy filings a couple of weeks previously. Either way, an approaching deadline looms.
Unite Here President Disputes Claims
The story from the workers is a starkly different one. Bob McDevitt, president of Local 54 of Unite Here, the casino workers union, released a statement which said the union thought it had “an agreement with all parties that would resolve all issues.” But just as Union 54 thought negotiations were at an end, “We were told that Carl Icah had gone back on his commitment.”
Unite Here has been fighting a plan that would take away the workers’ health and pension benefits. In October, Icahn won a judge’s decision to have those benefits taken from the workers, which caused a series of protests in Atlantic City.
Negotiations Key to Operations
The judge’s decision was a temporary one, so the two sides have to negotiate a permanent arrangement before Trump Taj Mahal can move out of bankruptcy. Complicating matters is the fact that any decision by one set of Atlantic City workers is likely to trigger similar conditions for other casino workers in the city, due to prior agreement.
Trump Entertainment CEO Robert Griffin tells a different version of the story from McDevitt. Griffin says the two sides had an agreement that would have given the workers “everything“, but they rejected that compromise.
Icahn on Bloomberg TV
Carl Icahn, one of New York City‘s most notable billionaire activist investors, has been trying to win the public relations battle during the negotiations. He went on Bloomberg Television’s “Street Smart” with Trish Reagan to discuss the situation, where he said, “Atlantic City can’t survive with current union contracts. I think the union understands that.”
Icahn added that he was risking $20 million on the current negotiation, and that he is “hopeful it works“.
Atlantic City’s Disastrous 2014
The year has been a disastrous one for Atlantic City. The casino gambling destination collects about 70% of its revenues from gaming-related sources, but the casinos generated only $2.86 billion in revenues in 2013. That was down from $5.4 billion in its peak year of 2006, which represents a decline of almost 50% in only 7 years.
Making matters worse, the city has seen its number of land-based casinos shrink from 12 to 8 over the course of the year. If Trump Taj Mahal also fails, the city’s number of casinos will go to 7–almost half of what it had to start the year. Under any circumstances, Atlantic City is facing a disastrous budgetary situation. Just last week, a casino lien auction took place in which the city hoped to collect $50 million to help offset a $70 million budget deficit. The auction only netted around $20 million.
Carl Icahn tried to get the city to bail him out of the current predicament, but Mayor Don Guardian balked at a proposal that would have given the casino the kind of tax breaks that would have made the worker sacrifices unnecessary. After those talks failed, Icahn returned to negotiations with the workers union. The choice for the employees seems stark: lose your benefits package or lose you job entirely. It remains to be seen which side might blink first, but the stakes could not be higher for the workers union.
Under the circumstances, it is possible the two sides will never find a compromise, since unions are in the business of getting employees such benefits.
Trump Taj Mahal’s Bankruptcy Case
On September 9, Trump Taj Mahal sought Chapter 11 bankruptcy protection. Since then, the casino has stayed in business by using cash representing secured lenders’ claims. First-lien holders are owed $286.6 million. Icahn Partners LTD is one of those first-lien holders, which is why he is trying to invest more money in the business, to protect his investment. If Carl Icahn’s plan works, he’ll have control of Trump Entertainment Resorts.
