After filing for bankruptcy surprisingly four times over two decades, Donald Trump is still valued at over $2.7 billion. The reason behind becoming a multibillionaire despite facing bankruptcies may open up a Pandora’s Box. Post these bankruptcies, different casino experts and bankruptcy lawyers were reached out for their opinions on the issue. Some of these people were also involved with chapter 11 cases related to Trump.
The years 1991, 1992, 2004 and 2009 saw bankruptcies filed due to hotel properties and over leveraged casinos at the Atlantic City. These entities were last reported to be operating under Trump Entertainment Resorts. Trump’s capacity to emerge out financially without opting for a personal bankruptcy marks a distinction. A law expert that represented the interests of unsecured creditors as soon as chapter 11 was filed by one of Trump’s properties had his take. He believes that entities having his ownership interests or corporations with the name connected have adopted such desperate measures.
The first set back was experienced in the personal front. Donald financed the building of a property by using scrap bonds and defaulted while repaying steep interest rates. Personal debt was valued at $900 billion and mid 90’s saw him lowering a substantial portion. It was achieved by selling airline franchise, yacht, and stakes in other businesses.
Donald Trump wasn’t apologetic at all for using the Chapter 11 to his benefit. According to his observation, notable entrepreneurs have applied for bankruptcy. It was a step taken towards restricting debts, improving business and freeing up capital. Trump believes that he had only used measures which are approved by country’s law following the path walked down by business stalwarts.
Another lawyer with ample experience in representing clients at notable Chapter 11 cases had his take. It is more about restricting and reshaping a company affected by problems. It hardly represents bad management or something nefarious from any perspective. According to lawyer Venditto, an alternative step would be fruitless. Instead of a non-functional casino, a functional one with cash flowing and earnings is likely to repay the creditors in a better way on a long term basis.
Donald Trump is a big name and his image helped him to survive the blows of bankruptcy. He rose to prominence with his ability of demanding a bigger percentage of the reorganization equity depending upon the value that his own brand adds to hotel or casino operation. Another expert associated with bankruptcies believes that his termination, re-branding and bringing a name change would have been costly.
Trump’s stake in hotels and casinos of Atlantic City bearing the name went downwards. As much as 50% equity was handed over to the bondholders to ensure favorable rate of interest in return during the first filing. In 2004, the stake came down at 25%. Over a clash of interest with bondholders prior to 2009 filing, he resigned as a board member of Trump Entertainment Resorts. Donald’s equity stake stands at 5% at present with 5% for warrants.
Trump himself need not be answerable for all the corporate bankruptcies. The creditors he dealt with were fully aware of the risky proposition. According to lawyer Viscount, the company carrying Trump’s name was simply over-leveraged which says that people were willing to lend money to Trump.
Image source: MichaelVadon