Monday, Jan. 31, 2005 | 9:21 a.m.
ATLANTIC CITY -- When a company goes bankrupt, it's often the small-time vendors and suppliers who suffer.
Bills go unpaid for goods and services delivered before papers were filed seeking bankruptcy protection. Or vendors are forced to settle their claims at a discount.
But when Trump Hotels & Casino Resorts filed for Chapter 11 bankruptcy protection two months ago, the approximately 1,900 businesses and individuals holding unsecured claims totaling $45 million got a break.
Under a reorganization plan worked out in advance, the unsecured creditors will be paid 100 cents on the dollar for their claims, according to the plan. Some already have been paid; others are still waiting.
Part public relations ploy, part practical consideration, the move is helping speed Trump Hotels' emergence from bankruptcy and maintain the flow of goods and services needed to keep the casinos operating in the meantime.
"It is an unusual course for a bankruptcy," said lawyer Michael Viscount, who represents several creditors. "Typically, the payment doesn't happen until the deal is done. The unusual thing here was that, as a public relations mechanism, they said 'We know we're going to spend this money. Let's spend it now.' "
In addition to keeping vendors happy, the move prevented the creditors from qualifying as "impaired" under bankruptcy law and thereby getting the right to vote for or against the reorganization plan.
Trump Hotels, which operates the Trump Taj Mahal, Trump Plaza and Trump Marina casinos in Atlantic City, filed for protection under the U.S. Bankruptcy Code on Nov. 21, listing $1.8 billion in debts and $1.6 billion in assets.
Under the plan negotiated beforehand with bondholders, Trump -- the nation's 74th richest person, worth $2.6 billion -- will surrender his role as majority owner but keep his titles as chairman and CEO.
If approved, Trump Hotels' bondholders would control about two-thirds of the equity in the reorganized company, thereby reducing interest costs by about $100 million a year.
While the investors who bought Trump Atlantic City and Trump Casino Holdings bonds have agreed to accept concessions, the unsecured creditors were never asked. According to Trump bankruptcy attorney Robert Klyman, more than $35 million in claims already have been paid out.
The unsecured creditors -- who include ice vendors and photographers, billboard companies and radio stations -- will be paid in full.
"With trade creditors, unless you're treating them appropriately, you may have to find other suppliers and vendors willing to extend credit to you as you operate your businesses" during bankruptcy, said John R. McDonald, a Minneapolis lawyer who specializes in bankruptcy case.
"In the casino arena, many of those suppliers you can replace, but there are highly specialized vendors and suppliers that might not be as easy to replace," McDonald said.
That's important for a business that intends to remain in operation.
Unlike bankruptcies involving companies headed for liquidation, the Trump Hotels case is aimed at restructuring the company so it continues operating and emerges from bankruptcy court protection stronger and better able to compete with other Atlantic City casinos.
"It's not that we ran out of money and were forced to liquidate the business," said Scott Butera, executive vice president of Trump Hotels.
"This is a voluntary plan, and as part of it, to preserve value, we feel it's very important to continue to pay our trade payables. All of our vendors, suppliers, employees -- the people important to keep the business running on a day-to-day basis -- we need to keep them current so that we can continue running the business through this process."
For some of Trump's vendors, the payments were a pleasant surprise.
"Obviously, I'm happy," said Sue Ann Romano, vice president of Sea Isle Ice Co., which submitted claims of $8,829 and $312. "Of course, everybody was concerned (after the filing). I had faith we would be paid."
Other creditors, though, are still waiting for their check to arrive.
"Nobody likes not getting paid, and we're no different," said Deborah Kole, staff attorney for the New Jersey State League of Municipalities, which is owed about $15,000. Her organization was contacted about its claim prior to the Chapter 11 filing and filled out a form but has yet to receive payment.
Ditto for Donna Connor, a photographer owed about $1,664.
"Sixteen hundred dollars doesn't hurt me. But I have not been paid and I have not received any indication of when I'll be paid," she said.
Several creditors contacted by the AP did not return calls seeking comment. Others declined comment on the status of their claims, fearful of losing business from Trump.
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