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Business Planning Keyed to Gevurtz
In re Donald J. Trump Casino Securities Litigation (Kaufman v. Trump’s Castle Funding)
Citation:
7 F.3d 357 (1993)Facts
In November 1988, the Trump defendants issued $675 million in first mortgage investment bonds with a 14% interest rate to raise capital for the Taj Mahal casino project. The prospectus accompanying the bonds estimated completion costs at $805 million, with funding coming from the bond proceeds, a $75 million capital contribution from Donald Trump, investment income, and potential additional loans. The Management Discussion and Analysis section of the prospectus stated: “The Partnership believes that funds generated from the operation of the Taj Mahal will be sufficient to cover all of its debt service (interest and principal).” The prospectus also contained extensive cautionary language about the risks involved, including the unprecedented size of the casino, intense competition in Atlantic City, absence of operating history, and potential inability to repay bondholders in case of default. After the Trump defendants planned to file Chapter 11 bankruptcy, bondholders filed complaints alleging securities fraud based on misrepresentations and omissions in the prospectus.
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