Breather for Trump in $20-Million Loan : Short-Term Deal Averts Default at Midnight on Bonds
Donald Trump averted the collapse of his debt-heavy real estate and casino empire at the 11th hour today by winning $20 million in short-term financing from his banks, banking sources said.
The payment will allow Trump to make a crucial interest payment on bonds due at midnight and give him breathing space to begin restructuring his cash-strapped holdings.
Trump had met with his bankers for weeks to get $65 million but had run into opposition from some lenders who did not want to participate in the new loans. In the end, seven banks agreed to the larger loan and released a $20-million portion immediately.
“The $20-million financing package gives Trump all the working capital he needs to avert bankruptcy,” a banker said.
Trump, who rose to financial fame in the 1980s, found his debt-heavy empire stumbling once the New York real estate market flattened out and the Atlantic City, N.J., casino marketplace was glutted with an oversupply of gaming halls.
The result has been a shortage of cash to cover his debts, which include an estimated $2 billion in bank loans and $1.3 billion in junk bond debt.
Bankers now expect Trump to slim down his lavish lifestyle and begin shedding some of the money-losing properties in his vast real estate portfolio that stretches from Palm Beach, Fla., to Fifth Avenue in New York.
Trump will also grant the bankers second mortgages and additional security on a batch of New York apartments and an airplane, those in the talks said.
The bank loan talks floundered in the last few days as Japanese, French and German banks refused to go along with the deal. But the Japanese caved in earlier this week, and bankers said Societe Generale, a French bank, backed the deal by day’s end.
Even after hours of late night bank talks and additional meetings this morning, West Germany’s Dresdner Bank AG still would not go along with the loan, the sources said.
It had lent $15 million for the Trump Tower in New York and did not want to go along with a second mortgage on the property that would dilute its security.
A lawyer in the talks said that the consent of Dresdner was not absolutely necessary to arrange the $20-million bridge loan, so the banks went forward without the West German bank.
With $20 million secured, Trump now has another 30 days to complete the complicated deal to obtain the rest of the $65 million, a package that has involved negotiations with more than 50 banks worldwide.
Citicorp, Chase Manhattan Corp., Bankers Trust New York Corp., Manufacturers Hanover Corp., First Fidelity Bancorp, Midlantic Corp. and National Westminster Bank PLC are all lending the fresh money to Trump.
The financing allows Trump to make an interest payment now 11 days overdue on bonds from the Trump Castle.
