Skip to comments.Trump sees bankruptcy as a competitive advantage
Posted on 04/10/2011 8:43:48 PM PDT by mnehring
Donald Trump's Atlantic City empire includes the Trump Taj Mahal. The casino company that bears Donald Trump's 24-karat name is heading for bankruptcy.
Trump sees bankruptcy as nothing more than a beneficial legal mechanism. There is no shame in bankruptcy, Trump says,"It doesn't matter - it's a modern-day thing, a legal mechanism," he told the Daily News.
Trump said he's "really happy" with the restructuring agreement that Trump Hotels and Casino Resorts has made with its largest group of bondholders, pavings the way for a $345 million investment from Credit Suisse First Boston.
The plan will be able to be carried out as the result of a pre-negotiated Chapter 11 bankruptcy proceeding.
That's right, $1.8 billion in debt will be cut by $544 million dollars, and the interest rate on the remianing portion of the debt will be reduced from about 12% to 7.875%. This will put Trump Hotels on an equal footing with competitors. Not only that, the deal gets a whopping $500 million line of credit for the renovating of the aging Atlantic City properties, build a new tower at Trump Taj Mahal and expand into the Las Vegas gambling scene.
"It becomes a whole different company," Trump was quoted as saying. Several analysts have said the deal is good enough medicine to heal the cash-starved Trump Hotels, which are known to have not turned a profit in their eight years as a public company, and have struggled to keep up prohibitive debt payments.
Sean Egan of Egan-Jones Ratings, a bond ratings firm, has said "This removes the sword of Damocles that was hanging over the company".
Trump insisted, as part of the restructuring efforts, to the investing of $55 million in cash of his own money. This was his idea, rather than a demand by Credit Suisse or the bondholders.
Trump will now be chairman instead of chief executive, and his ownership stake will be down to 25% from the original 56%. The star of "The Apprentice" will however, stay involved in Trump Hotels and be paid an annual salary of some $2 million. Apparently bankruptcy has it's advantages.
Trump will be overseeing development interests and projects, and deal with government officials in new markets the company enters.
"It was extremely important that Trump be incentivized to work with us," said excecutive vice president Scott Butera, who's in charge of the financial restructuring of the Atlantic City empire which includes the Trump Taj Mahal.
Donald John Trump, born June 14th, 1946, was the son of Fred Trump, a multi-billion dollar real estate mogul.
After attending the Wharton business school, Trump joined the family real estate business. A self-promoting and flamboyant dealmaker, he was able to secure loans with minimal collateral in the free-wheeling 1980s and created an empire in real estate, casinos, sports, and transportation.
By 1990, however, the effects of recession had left him unable to meet loan payments. Although he shored up his businesses with additional loans and postponed interest payments, mounting debt brought Trump to business bankruptcy and the brink of personal bankruptcy. Banks and bondholders lost hundreds of millions of dollars but opted to restructure his debt to avoid risking losing even more in a court fight.
By 1994, Trump had eliminated a huge portion of his $900 million personal debt and reduced substantially his nearly $3.5 billion in business debt. Forced to relinquish the Trump Shuttle (bought in 1989), he retained Trump Tower in New York City and control of his three casinos in Atlantic City.
Chase Manhattan, which lent Trump the money he needed to buy the West Side yards, his biggest Manhattan parcel, forced a sale of the parcel to Asian developers. According to former members of the Trump Organization, Trump did not retain any ownership of the site's real estate - the owners merely promised to give him about 30 percent of the profits once the site was completely developed or sold. Until that time, the owners kept Trump on to do what he did best: build. They gave him a modest construction fee and a management fee to oversee the development. They also allowed him to put his name on the buildings that eventually rose on the yards because his well-known moniker allowed them to charge a premium for their condos.
In 1995, he combined his casino holdings into the publicly held Trump Hotels & Casino Resorts. Wall Street drove its stock above $35 in 1996, but by 1998 it had fallen into single digits as the company remained profitless and struggled to pay just the interest on its nearly $2 billion in debt. Under such financial pressure, the properties were unable to make the improvements necessary for keeping up with their flashier competitors.
In 1999 Donald's father Fred Trump passed away. The same man who co-signed Donald's first business loans, also happened to be the man who enabled Donald to escape from the massive financial morass he had created over the decades. Unfortunately, creditors who got stuck with the past losses were not as fortunate, being forced to take catastrophic writeoffs and losses even up to 2004 when Trump refused to continue to back his casino.
Trump toyed with the idea of running for president on the Reform party ticket. Crippling debt payments forced his casinos into bankruptcy again in 2004, and Trump's stake in the company was greatly reduced when it emerged from bankruptcy in 2005. Widely known as simply the Donald, Trump stars in his own reality television show, which debuted in 2004.
Although Trump boasted he would build a bigger empire than his father, in the end, his father had built an empire large enough to accommodate even Donald's most lavish personal losses.
Donald J. Trump continues to be a successful business entrepreneur to this day.
The Forbes 400 lists his net worth at $2.7 billion, though Trump himself claims to be worth over $5 billion. However, on October 26 2005 the New York Times published an investigation into the history of Trump's net worth which suggested that the figures stated by Forbes have regularly been several times greater than his actual worth, even though they have been much lower than Trump's own personal estimates.
Thanks for posting an article from nearly 7 years ago.
I didn’t know history had an expiration date.
As it is, they took billions of our dollars instead, and they are headed over the cliff once again.
Sounds like a smart man, using loopholes to his advantage. Besides, I would think that he would run a country a little different than a struggling business that he takes over.
Before anyone thinks Trump is a fiscal Conservative, one should understand how he runs his businesses. He takes big risks but uses the government bankruptcy system to his advantage so he doesn’t face the consequence of massive debt that doesn’t reap a return.
America should do the same thing and kick the federal no reserve out of the country and go back to a gold standard.This funny money game is OVER and the government knows we can never pay in the long run.
I suppose you never fly on any airline either...since just about all of them (except maybe SWA) have filed Chapter 11 at one point or another.
I agree. The USA should declare it and start over.
So very true!
Sounds like he was also willing to put his personal stake in there...
I like both of them and have no problem with the article. Part of being smart is knowing how to take advantage of situations and opportunities. If someone doesn’t like how a person took advantage of a situation created by law, they need to take that up with the people who make laws, not the people who abide by them.
It’s not quite that easy. What do you think China would do?
That casino BK is old news. Trump is smart enough to get the bankers to lend him so much money that they cannot afford to let him go into BK. They always have to allow him to restructure on better terms. He is very shrewd.
I don’t want an airline executive to be Commander in Chief of the United States Armed Forces either.
Too many well-intentioned Freepers do this a lot.
They know just a little too little about subjects like:
-governing (NOT politicking)
And make comments that show the true lack of understanding as to the reality of how something works.
T-Bill soup? I care less what China does. Screw em.
The country could use some of that negotiation power!
Wow that’s an old article.
Does a shooting war sound good? One we wouldn’t have the funding to fight?
sniff sniff sniff...
One gains creditability by bouncing back from the bottom.
Trump has many, many, MANY faults, but sad to say, he’s probably the only one who can beat 0bama.
While I hate the concept of bankruptcy, maybe he will use rules and laws to put us at a competitive advantage with respect to others in the world. That seems to be his strength, and God knows we’re in trouble economically.
Unless someone emerges who is more willing to call out 0bama on his chicanery, I think Trump is the best we’ve got.
Maybe we could borrow enough for the war from Trump?
It is a tool in business, very true, but it demonstrates a fiscal attitude that does not translate into government function. Using this attitude in government results in a Keynesian structure where debt is acceptable and can be ‘written off’ as needed, but instead of bankruptcy, which isn’t afforded governments. Instead, you get exactly like you have now.
I find it amazing how so many are drinking his kool-aid when he is far to the left of even McCain on most issues.
He is pro-gun control, pro-progressive taxation, pro-abortion, pro-socialized medicine.. and so on..
I’m sure a lot of wonderful Freepers have been bankrupt at some point (and bounced back) themselves.
I’m just basing this on statistics of course.
This story was originally published on August 11, 2004.
Interesting, the east coast was still recovering from Sept 11th
If you think so, go ahead and click abuse.. please.. I'll gladly post against a life-long democrat supporter, pro-abortion, pro-gun control, pro-progressive tax, pro-socialized health care, bend in the wind media darling that makes McCain look Conservative. Heck, I'll ping the mod myself if you would like.
Hmm... Maybe not finance anymore of our debt and make us live within our means!
Trump made quite a lot of progress since August 11, 2004 considering the hit the north east and tourism took after Sept 11th.
Hopefully we can find a candidate that knows business enough to do what Trump did only for our nation.
Funny, I recall a lot of people asking us to overlook Rudy's history of liberal policies because of how he handled 9/11 and his stand on the WOT. A lot of policies identical to Trump's.
You got that right.
Looks like the liberal/libertarian wing of FR is firmly in Trump's corner.
Is he playing by the rules?
Too many like the Mr. Right Now of Trump. He is a mirror of Rudy policy wise.
Is that game one we want taken to the government? See #27.
Winning at any cost is the only thing that matters!
Besides, those other pesky conservative values just get in the way anyways, who needs them as long as a “Republican” replaces Obama!
Too bad we can't say the same for Palin as of late. A year ago, she had my full support. Not so much today because all we get from her is talking points with no actual substance as to what her policies actually are and how she will implement them. She has truly become an established political elite in how she comes across anymore. Laughing off Trump and chuckling that it is his money, he can spend it as he wishes was a total turnoff. What does that say of her knowledgeof national security & its threats from enemies within? Did she not get the memo that less than 1 in 10 Americans do not believe Obama’s birth narrative? Does she really believe that newspaper birth announcements are proof of citizenship? If so, I want to take her & my SD newspaper birth announcement when I go to get my next drivers license, even though I was born just across the border in MN.
Few people here understand business bankruptcies. Often the creditors want a chapter proceeding because it gives them an orderly way to adjust the debt. Moreover, when the proceeding results from something that looks cyclical and the management/owner is capable, they typically want to keep the management/owner. That is something of a summary of the Trump case. This is one I know reasonably well.
Mirror image is right. No doubt about it.
Trump and Giuliani, two liberal Republicans in the fast lane.
Just to put it in comparison, here is Rudy's policy chart.
..and Bill Clinton's chart
From ontheissues.org He is way closer to Bill Clinton than he is someone we all agree is a RINO.
See #42, He is actually a lot closer to Bill Clinton on issues than he is Rudy. Heck, he actually makes Rudy look Conservative.
Yes, well how Rudy handled 9/11 was a reaction to a disaster, a crisis, an attack. Not economic which is where the US is bleeding right now. Rudy's handling of the attack of the Twin Towers and running and economics seems to be comparing apples to oranges, don't you think?
A lot of policies identical to Trump's.
Trump's policies based on which office of government he has held?
Positions he has taken such as policies he has directly supported and politicians he has supported financially. Such as supporting Obamacare or his history of donations to Democrats by a greater margin than Republicans. Michelle Malkin had a good piece on it. Also, ontheissues.org has a good break down policy by policy. Actually going back, I found he is almost identical to Bill Clinton on policy, Rudy wasn't the best example looking at Trump's whole history. He makes Rudy look Conservative.
I don't see how you can judge a man's issues who has not yet help political office and he's just starting to tell where he stands.
He has been telling us where he stands for years, mostly with his pocket book on what he supports and finances. He is no mystery. We have a long documented history of Trump and it isn’t standing for Conservative causes. We don’t need to take his pandering for the camera now at face value, we can weigh it by his history to see if he is telling the truth.
They place Giuliani in the conservative quadrant. I don't buy it. Trump and Giuliani are liberals and nothing anyone says will ever change that. Same goes for Romney.
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