Developer Saved From Insolvency by $65 Million Bailout
NEW YORK (AP) _ The threat of bankruptcy stalking Donald Trump has receded now that bankers have come to his rescue with a $65 million long-term loan and debt restructuring deal.
The bailout appears to have come at a high cost to Trump, once considered by many to be financially invincible and given great leeway by his lenders.
In exchange for providing the fresh credit, Trump’s rescuers have gained some control over his holdings and will closely monitor his personal and business dealings for years to come.
The breakthrough in prolonged negotiations over the loan and restructuring plan came Tuesday when lawyers decided they didn’t need the approval of the lone bank that continued to balk at the deal after some 65 to 70 decided to go along.
Because paperwork on the complex deal was not complete, Trump’s major lenders decided to forward him a $20 million, 30-day loan so he could make overdue payments on bonds sold to finance his Trump’s Castle hotel and casino in Atlantic City, N.J.
Earlier this month, Trump missed a $43 million interest and principal payment on the Castle bonds and got behind on a $30 million bank loan.
After Trump missed the initial due date on the bonds June 15, a 10-day grace period went into effect. Had Trump failed to make the payments by midnight Tuesday, he would have been in formal default and the assets backing those debts could have been seized by creditors.
The negotiations yielded a new five-year commitment from Trump’s bankers that will spread out payment on more than $2 billion in outstanding loans over the term of the pact.
A clearly relieved Trump said in an interview that he was happy with the outcome and confirmed that the agreement limits his household and personal spending to $450,000 a month for the rest of this year.
″There are certain restrictions ... I can live with them,″ he said.
In addition, there were reports that Trump must stick to a business plan, adopt a system of accounting controls and change accounting firms. A spokeswoman for Trump, Norma Foerderer, said she could not confirm the reports.
One source involved in the negotiations, speaking on condition of anonymity, said it could take up to two months to prepare the final documents on the financial rescue. The large number of banks and attorneys involved will make the task time-consuming, the source said.
The financial foundation of Trump’s property portfolio, much of it amassed with borrowed money, has looked increasingly vulnerable in recent weeks. A slump in the New York real estate market and disappointing results from his Atlantic City casinos had put a cash squeeze on Trump, endangering his ability to remain current on his debts.
The long-term $65 million bailout and debt restructuring package contains numerous requirements, including one that Trump sell assets to raise cash, according to the source.
It was not believed that the agreement specifies which properties Trump must sell.
The lone holdout to the deal, Dresdner Bank AG of West Germany, continued to withhold its consent to the deal, but attorneys decided that Dresdner’s endorsement wasn’t essential, a banking source said.
Dresdner, whose $15 million loan to Trump is secured by the first lien on Fifth Avenue’s Trump Tower skyscraper, has opposed placing a second lien on the building.
It was considered possible that Dresdner might have second thoughts and eventually agree to the deal during the time it takes to complete the paperwork.