Trump Taj Mahal Files First Bankruptcy After Junk Bond Collapse

Donald Trump’s Trump Taj Mahal casino in Atlantic City filed for Chapter 11 bankruptcy protection in July 1991, just over one year after its lavish April 1990 opening. The casino, which Trump had called “the eighth wonder of the world,” was buried under nearly $3 billion in debt, much of it raised through junk bonds carrying interest rates as high as 14 percent. Trump had personally guaranteed $833 million of the debt despite having a reported net worth of only $206 million according to the Casino Control Commission.

The Debt Trap

The Taj Mahal’s collapse stemmed from Trump’s aggressive financing strategy. Despite promising the New Jersey Casino Control Commission that he would use “prime rate” bank loans, Trump instead turned to high-interest junk bonds, ultimately paying roughly 50 percent more than he had projected to raise $675 million for the $1 billion project. When the casino opened, it immediately cannibalized revenue from Trump’s two other Atlantic City properties—Trump Plaza and Trump Castle—creating a self-inflicted crisis across his entire casino empire. The Taj missed its first debt payment in October 1990, just months after opening, unable to generate enough revenue to cover the crushing interest payments.

Creditors Force Restructuring

The prepackaged bankruptcy forced Trump to surrender 50 percent of his personal stake in the casino to bondholders in exchange for significantly lowered interest rates and an extended payoff schedule. To stay solvent and meet his personal debt obligations, Trump was forced to sell prized assets including his Trump Shuttle airline and his 282-foot yacht, the Trump Princess. Small businesses and contractors who had built the Taj Mahal were forced to accept pennies on the dollar for their work, while bondholders—many of them retirees who had invested their savings—saw their investments decimated.

Pattern Emerges

The Taj Mahal bankruptcy established a pattern that would repeat throughout Trump’s business career: borrow heavily using other people’s money at high interest rates, overpromise on revenue projections, and when the debts become unsustainable, use bankruptcy protection to force creditors to absorb losses while Trump personally walked away with reduced but still substantial ownership stakes. Washington Post investigative reporter Robert O’Harrow noted that Trump’s Atlantic City ventures demonstrated his willingness to prioritize personal survival over the financial wellbeing of investors and creditors—a business model that relied on legal protections rather than operational success.