Donald Trump’s companies have filed 4 bankruptcies


April 21, 2011 – Donald Trump – or companies that bear his name – have declared bankruptcy four times.

Trump built an American Empire from Las Vegas to New York with towering hotels and sparkling casinos. Forbes estimates it is worth $ 2.7 billion. But not all of Trump’s business ventures have been consistently lucrative. In 1991, 1992, 2004, and again in 2009, Trump-branded companies or properties filed for Chapter 11 protection.

“I used the laws of this country to reduce the debt.… We will have the company. We will launch it in a chapter. We will negotiate with the banks. We will make a fantastic deal. You I know, it’s like in” The Apprentice “. It’s not personal. It’s just business,” Trump told George Stephanopoulos of ABC last Thursday.

A company declaring bankruptcy is nothing new in American companies, where bankruptcy is often equated with “restructuring debt”. But it may sound alarming to ordinary Americans who cannot ask a bank to restructure their home loans. If you want to keep Donald Trump warm, accuse him of declaring bankruptcy.

Doug Heller, executive director of Consumer Watchdog, said Trump is “the most glaring, almost comical example” of the disparity between what the average American faces when he goes bankrupt and the “ease with which very rich can go in and out of bankruptcy. ”

“Under US bankruptcy laws, if you find yourself in bankruptcy because you are struggling with a divorce or medical payments or a sudden change in income, it is a disaster. If you fail miserably with huge dollars at stake, you just need a few accountants to rework your books, ”Heller said.

The multi-billionaire is touting his huge net worth and his experience in big business as qualifying for his eventual presidential race. Trump recently boasted that he has “a lot more net worth” than Mitt Romney, who he says is “essentially a small business man.”

“I’m a much bigger businessman.… I mean, my net worth is many times that of Mitt Romney,” Trump said.

The great businessman has had a fight with big debts for the past 20 years. Trump’s first visit to bankruptcy court was in 1991, when his Atlantic City casino, the Taj Mahal, was buried under a mountain of debt. The Taj cost $ 1 billion and was funded by junk bonds with a staggering 14% interest rate. When construction was completed, the economy collapsed, as did the Atlantic City gaming scene, soon plunging Trump into $ 3.4 billion in debt.

“Keep the Donald afloat”

“[The banks] could have just taken whatever he had at the time, but they wanted his cooperation, ”said Lynn LoPucki, bankruptcy expert and UCLA law school professor. their mercy. If you owe the banks a lot, the banks are at your mercy. They saw that the best way for him to repay the money was to keep the Donald afloat. ”

The Donald made a deal with the banks to give up half of his property and half of the casino’s equity in exchange for a lower interest rate and more time to pay off his debt. He sold his beloved Trump Princess yacht and the Trump Shuttle plane to make his payments, and his creditors imposed a budget on him, capping his personal expenses.

“The first one was a huge success for him. They had it personally, and he ended up suffering substantial losses in that bankruptcy. He also had the humiliation of having bankers deciding how much money he could spend – the numbers are just amazing – the amount of his monthly budget, ”LoPucki said.

John Pottow, bankruptcy expert and law professor at the University of Michigan, said banks would often agree to lose millions in reorganizations like Trump’s to avoid the massive losses they would incur if they closed the property.

“Banks will suffer massive haircuts,” Pottow said. “It’s like having a sick patient so you cut off a few toes to stop the gangrene. Now he’s missing a few toes, but he’s still alive.”

Trump hotels and resorts

Only one year after the conclusion of the agreement with the Taj Mahal. Trump was back in court, “restructuring” his debt again. This time, the Trump Plaza hotel in Atlantic City was in the crosshairs of lenders. Trump owed the hotel $ 550 million and agreed to sell 49% of the hotel to Citibank and five other lenders. In return, Donald Trump obtained an agreement similar to the one before, with more lenient conditions to repay the debt. The Donald remained as managing director, but his salary was withdrawn.

“Here’s a guy who’s failed miserably so many times and it’s not like he has to fight his way out after seven years in credit hell. He just said. ‘OK, that’s not my anymore. problem.’ For him, this has only been a platform for the next lucrative agenda, ”said Dough Heller, executive director of Consumer Watchdog.

In 2004, Trump Hotels and Casino Resorts Inc. filed for voluntary bankruptcy after accumulating $ 1.8 billion in debt. The Donald agreed to reduce his stake in the company from 47% to 25%, meaning he no longer had control over the company. The deal also included lower interest rates and a $ 500 million loan to make improvements.

“In 2004, that’s when he lost control of his name. A rule when you have a name like Trump is to never let anyone own and control him. Name. They can do whatever they want. once they own it, ”LoPucki said.

Shortly after the procedure, Trump told CNN’s Geri Willis that his personal fortune would not be affected. “It’s a very small part of my net worth. It’s less than 2%,” he said.

When the economy contracted in 2008, so did Trump’s real estate holdings. Trump Entertainment and its affiliates had $ 2.06 billion in assets and $ 1.74 billion in debt. In December 2008, his company missed a bond interest payment of $ 53.1 million, pushing Trump Entertainment Resorts into bankruptcy court and pushing its share price from $ 4 per share to just 23 cents.

This time, Trump fought with his board over the restructuring and ended up resigning as chairman of the board. He came out of a messy process lasting several months with a 10 percent share of the business.

LoPucki said it was very unusual for anyone to see many large companies go bankrupt. Most of Trump’s debt came from bonds sold to the public.

“People knew who Donald Trump was and for that reason were willing to trust the bonds, and they were burned,” LoPucki said. “People who invested with him or based on his name lost money, but he himself did pretty well.”

ABC News’ Kristina Bergess and Nick Gass contributed to this report.


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