Trump entertainment wins approval to scrap union benefits
Bloomberg News
Trump Entertainment Resorts Inc. won bankruptcy court approval to end union health-care and pension programs, increasing the odds that the company can keep the Taj Mahal casino open.
U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, ruled today that the company could impose the concessions, a move that may lead to benefit cuts for other unionized casino employees in Atlantic City, New Jersey.
The company is seeking to shift workers in Unite Here Local 54, which represents more than 1,100 employees at the Taj Mahal, from a traditional pension to a 401(k) program. It also wants to end the health-care plan and move workers to a program under Affordable Care Act sponsorship. Employees would get a $2,000 stipend to help pay for coverage.
Trump Entertainment needs the concessions to avoid liquidation, and would otherwise have to close the Taj Mahal, Kristopher Hansen, a lawyer for the company, said at an Oct. 14 hearing. The casino faced shutdown as early as next month, the company has said.
The judge today denied the union's request to freeze the order while it seeks an appeal, saying the balance of equities favored Trump Entertainment, which needed the ruling to take effect immediately. His decision will be retroactive from Sept. 26, when the compay made the request
"The decision today will certainly enrage the workers who have relied on and fought for their health care for three decades," Unite Here Local 54 President Bob McDevitt said in a statement. "We intend to continue to fight this both in the courts and in the streets."
Trump Entertainment shut the Trump Plaza last month as Atlantic City loses customers to casinos in surrounding states. Casino revenue in the city fell more than 40 percent to about $2.8 billion in 2013 from a peak of more than $5 billion in 2006.
The company argued that the current union contract imposed an unsustainable $20 million in annual costs and that cuts were needed to induce lenders controlled by billionaire Carl Icahn to invest $100 million. The lenders would also convert some of the company's $292 million in debt into equity.
Cuts at Trump Entertainment may open the way for most other Atlantic City casinos to seek the same concessions from Unite Here under a so-called most-favored-nation clause in their labor agreements, according to court documents.
The union had argued that Gross didn't have authority to decide whether Trump Entertainment can cancel the contract and that federal law requires the dispute to go before the National Labor Relations Board.
Union members rallied against the proposed cuts last week, protesting in front of Icahn's Tropicana casino in Atlantic City. Several hundred casino workers, some chanting "no health care, no peace," also blocked a highway in the city to protest the concessions.
"Tropicana's major owner wants you to believe that the demand to take away workers' health insurance is necessary because of the financial situation at the Taj Mahal and in Atlantic City," McDevitt said in the statement. "We believe it has nothing to do with either."
The fight now turns to Republican Governor Chris Christie and other New Jersey officials from whom Trump Entertainment is seeking as much as $175 million in tax relief and incentives.
The contract modifications will allow the company to operate pending the outcome of discussions with state and local authorities, Trump Entertainment said in a statement after the ruling.
"We look forward to working with our elected officials," Chief Executive Officer Robert Griffin said in the statement. "With bipartisan leadership we believe we can take a collective step towards a brighter future in Atlantic City."
Donald Trump, the real-estate tycoon who founded the company, has no involvement in Trump Entertainment now and has been seeking to have his name removed from its properties.
The case is In re Trump Entertainment Resorts Inc., 14-12103, U.S. Bankruptcy Court, District of Delaware (Wilmington).
responsible for this story: Andrew Dunn at adunn8bloomberg.net Charles Carter