A bid in bankruptcy court to set aside a labor contract for 1,136 employees at Atlantic City's Trump Taj Mahal casino has set up a pitched battle between Unite Here Local 54 and Carl Icahn.
Icahn, a billionaire investor known for taking control of financially distressed businesses by buying debt at a discount, controls the fate of Trump Entertainment Resorts because he owns $286 million in first-lien debt and stands first in line to be paid in any bankruptcy deal.
As a condition of keeping Trump Taj Mahal open, Icahn wants massive concessions from labor and government.
Under the proposal detailed late Friday in a motion to reject Local 54's collective bargaining agreement with Trump Taj Mahal, union members would have their traditional pension replaced with a 401(k) plan and lose their company-paid health insurance.
The bankrupt Trump Entertainment Resorts, which owns the Taj Mahal, proposed ending the present labor contract. The union pushed back in a statement Monday aimed at Icahn.
"Icahn Agency Services are seeking to take advantage of the Atlantic City crisis to do away with the health care thousands of South Jersey casino workers and their families have fought for and relied upon for over 30 years," Bob McDevitt, president of Unite Here Local 54, said in a statement.
The union, which has been busy trying to help the 7,000 workers who have been displaced by four casino closures this year, said it requested six-month contract extensions from all the casinos it represents in Atlantic City. The only casinos to reject the request were Trump Taj Mahal and Tropicana, the union said.
Icahn owns Tropicana outright and owns the Taj Mahal's debt.
"It's unbelievable to me that the union is somehow blaming me that the Taj may close," Icahn said in a statement. "I've never had anything to do with management at the Taj."
A proposal like the one by Trump Entertainment can often be part of hardball labor negotiations, but that doesn't mean Trump will get its way.
"If a union is well-counseled and reasonable in the counteroffers that they propose, that will usually protect them from having the contract set aside," said Philip L. Harvey, a professor at Rutgers School of Law-Camden.
Even with the $85 million in total annual savings proposed last week and $100 million from Icahn, Icahn's lawyers warned in a letter that the casino is still likely to "continue suffering significant operating losses."
Under the plan, Icahn would forgive a portion of the debt he holds in exchange for equity plus new debt that would not charge interest, saving Trump Entertainment $37.4 million a year in interest payments.
In addition to the interest savings and $14.6 million in union-related cuts, the plan depends on $3.5 million in savings from nonunion workers, $29.8 million in property-tax relief from Atlantic City, and $25 million in aid from the Casino Reinvestment Development Authority or another government entity.
Trump Entertainment said every aspect of the proposed restructuring plan was needed to keep the Taj Mahal open.
The demands on labor could be moot because Atlantic City Mayor Don Guardian said Monday that he cannot agree to the tax rollbacks because of Atlantic City's own financial difficulties, the Associated Press said.