Trump Entertainment Resorts, the bankrupt Atlantic City, N.J., casino owner, was denied court approval to immediately stop contributing to a union pension fund, a blow to its restructuring effort that threatens the future of its remaining casino.
At a hearing Friday in Wilmington, Del., U.S. Bankruptcy Court Judge Kevin Gross said the company didn't satisfy the requirements necessary to stop funding the employee pension plan.
Eliminating just the pension from the collective bargaining agreement would violate the bankruptcy code, which requires a contract to be considered as a whole, the judge said.
“The court does not have authority to reject a portion of a CBA,” Mr. Gross said. The ruling doesn't prejudice Trump Entertainment's effort to scrap the entire union deal, including the pensions, at an Oct. 14 hearing, he said.
The company, which is trying to avoid closing its Taj Mahal casino next month, said in court filings that the union contract costs about $15 million a year in health, welfare and other benefits and $5 million in pension payments.
Trump Entertainment said it can't afford the pension payments. Exiting the fund and obtaining other concessions from the union are “absolutely critical” and needed immediately to make its restructuring work, Kristopher Hansen, a lawyer for the company, told Mr. Gross at a hearing Thursday.
The union concessions are necessary to get lenders controlled by billionaire Carl Icahn to invest $100 million in a reorganized Trump Entertainment and swap its $292 million in debt for 55% of new equity and some new debt, the company has said in court filings. Trump Entertainment must also persuade local and state governments to cut its property taxes.
Trump Entertainment, which owns two properties in Atlantic City, closed the Trump Plaza last month and said it might shutter the Taj Mahal by mid-November if it can't cut costs.