Trump Castle and Trump Plaza File Simultaneous Bankruptcies

Trump Castle and Trump Plaza Hotel and Casino in Atlantic City both filed for Chapter 11 bankruptcy protection on March 9, 1992, marking Trump’s second and third casino bankruptcies in less than a year. Trump Castle faced $338 million in bond debt it could not service, while Trump Plaza was drowning in $250 million of accumulated debt. Both properties had seen their revenues collapse after the opening of the Trump Taj Mahal in April 1990, which siphoned customers away from Trump’s two older casinos, creating a devastating cannibalization effect within his own casino portfolio.

Recession and Self-Inflicted Competition

The bankruptcies occurred during the 1990-91 recession, but the casinos’ troubles were primarily self-inflicted. Trump Plaza’s revenues had taken a sharp decline starting in 1990 due to direct competition from the Trump Taj Mahal, located just one mile away. The Plaza had narrowly avoided default on a 1991 bond payment only by taking out a $25 million emergency mortgage on its parking garage. Trump Castle, which Trump had acquired in 1985, faced similar revenue problems as the Taj Mahal drew high-rollers away from the smaller, less glamorous property.

Prepackaged Restructuring

Both casinos filed prepackaged bankruptcies, with debt restructuring agreements already negotiated with creditors before the formal Chapter 11 filings. At Trump Castle, creditors agreed to exchange $338 million in debt for $200 million in bonds with lower interest rates, plus $100 million in preferred stock. Trump surrendered his 50 percent ownership stake in Trump Castle in exchange for the reduced debt service. At Trump Plaza, Trump gave up 49 percent of his ownership to creditors while maintaining operational control. The simultaneous bankruptcies demonstrated that Trump’s Atlantic City empire was fundamentally overleveraged and poorly planned from a competitive standpoint.

Walking Away from the Wreckage

The dual bankruptcy filings showcased Trump’s business strategy of using Chapter 11 protection to transfer losses to creditors while maintaining his brand and partial ownership. By March 1992, all three of Trump’s Atlantic City casinos had filed for bankruptcy protection within a single year, with Trump personally reducing his ownership stakes but avoiding personal bankruptcy. Bondholders and small business creditors bore the financial losses, while Trump retained enough ownership and control to continue profiting from the casino operations and licensing his name to the properties. Congressional testimony later noted that Trump “earned millions” even as his Atlantic City casinos went bankrupt multiple times.