When Republican front-
runner Donald J. Trump was pressed Thursday about his companies' four bankruptcies in 18 years, the blustering business mogul called them routine corporate deals allowed by law and repeated by "many, many others on top of the business world."
To secure better deals or more time to pay off debts, Trump forfeited lucrative ownership stakes and allowed bankers, lawyers and bondholders to feast on his empire. In one deal involving hundreds of millions of dollars in debts he had personally guaranteed, he agreed to sell his airline and mega-yacht, and he allowed bankers to stipulate how much he could spend every month.
Trump has said his business acumen could help right a country “that’s essentially bankrupt,” and he has pointed to successful business leaders with histories in corporate-bankruptcy court, such as Carl Icahn and Leon Black, to back his point that the filings are a cost of doing business.
“We’ll have the company. We’ll throw it into a chapter. We’ll negotiate with the banks. We’ll make a fantastic deal,” Trump told ABC in 2011. “You know, it’s like on ‘The Apprentice.’ It’s not personal. It’s just business.”
The 69-year-old real estate tycoon has never filed for personal bankruptcy and has for years portrayed the Chapter 11 bankruptcies of his glittering hotels and casinos as calculated, even shrewd maneuvers, and facts of life in the high-stakes worlds of mega-development and commercial finance.
The Trump-tied bankruptcies have all been filed under Chapter 11, a provision allowing troubled companies to stay in business while restructuring their business model or reducing their debts. In the business world, those filings are far more common, and far less disastrous, than Chapter 7 bankruptcies, in which companies are liquidated to satisfy debts.
There are also many posh developments bearing the Trump name — including Trump Tower in Manhattan, sprawling condominiums in Istanbul and an upcoming luxury hotel near the White House — that have not headed to bankruptcy court. “Hundreds and hundreds of deals,” he said at the debate, and “four times I’ve taken advantage of the laws. And, frankly, so has everybody else in my position.”
But Trump was exaggerating, experts said, when he said that virtually every business leader has filed bankruptcy. An estimated 5 percent of the 500 biggest U.S. companies have filed for bankruptcy in the past two decades, Georgetown law professor Adam Levitin said.
A Chapter 11 filing, said Henry Sommer, editor in chief of the legal treatise Collier on Bankruptcy, can be a legitimate, respectable business response to corporate woes such as an industry shift or other nasty surprise — though, he added, it can also stem “from deals that were poorly put together to begin with.”
Some of the debt Trump’s businesses took on was through bonds sold to the public, meaning bondholders who trusted and invested in the Trump name were left holding the bag. But the self-styled master businessman did not deal directly with small investors and said during the debate that the banks, hedge funds and financiers who have backed his projects “are not the nice, sweet little people that you think.”
"Lenders are grown-ups. They're consenting adults. There are almost no ma-and-pa bond holders anymore," Levitin said. "He's dealing with mega-banks and hedge funds. . . . These are guys that can take care of themselves. Donald Trump might be the biggest fish on the Republican debate stage, but he's far from the biggest fish in the lending world."
The first Trump-tied bankruptcy, in 1991, was of Trump’s biggest Atlantic City casino, the Trump Taj Mahal, whose $1 billion construction was financed by junk bonds at a staggeringly high interest rate of 14 percent. Its glitzy unveiling fell flat amid slumps in Atlantic City and the broader U.S. economy, leaving the Trump firm more than $3 billion in debt.
Rather than the “fantastic deal” that Trump has celebrated, financial experts say the filing, and Trump’s guarantee of the debt, marked the moment when his personal fortunes were most in jeopardy.
Around that time, Trump later told The Washington Post, he passed a beggar in New York and told his now ex-wife, model Marla Maples, "You see that man? Right now he's worth $900 million more than me."
For a lower interest rate and more time to make loan payments at the Taj Mahal, Trump struck a deal with his lenders, giving up half his ownership and equity in the casino that bore his name. He also agreed to a bank-set limit on his personal spending and sold his airline, the Trump Shuttle, and his 282-foot yacht, the Trump Princess, which he had bought a few years earlier from the Sultan of Brunei.
Alan Garten, Trump's general counsel, said it was not fair to compare those losses, in which he had pledged his personal assets in support of the loans, to a personal bankruptcy. He also reiterated Trump's thoughts on the ubiquity of corporate collapse: "There's no question that many companies file for bankruptcy, and it happens all the time . . . to companies of all shapes and sizes, many of which are backed by wealthy, successful people."
In 1992, one year after the humbling developments of Trump’s first business bankruptcy, the mogul was back in court with another Atlantic City mega-property, the Trump Plaza Hotel and Casino, crushed beneath $550 million in debt.
For easier repayment terms for those debts, Trump agreed to give up his 49 percent stake to a half-dozen lenders, including Citibank. Trump stayed on as chief executive, though the role was symbolic and declawed: He did not have a role in day-to-day decision-making, and he did not earn a salary.
In 2004, Trump faced his third corporate bankruptcy, when his Trump Hotels and Casinos Resorts — which controlled the Trump Taj Mahal, Trump Plaza and Trump Marina (formerly Trump’s Castle) casinos in Atlantic City, as well as a riverboat casino in Indiana — was buried underneath $1.8 billion in debt.
To help secure lower interest rates and a $500 million credit line, Trump agreed to shrink his stake in the company from 47 percent to about 27 percent.
Trump brushed off the bankruptcy as "really just a technical thing" that touched only a small fraction of his net worth, telling the Associated Press then, "I don't think it's a failure, it's a success." But Trump also pumped $72 million of his personal fortune to help keep the restructuring afloat.
In 2009, Trump Entertainment Resorts, formed in the aftermath of the Trump empire’s bankruptcies, itself declared bankruptcy after missing a $53 million bond interest payment. The company, which ran the Trump Plaza and Trump Taj Mahal, was forced into court, scattering investors and sending its $4 share price plunging to about 25 cents.
After a messy, months-long sparring with the company’s board of directors on how to reshape the company and repay the debt, Trump resigned as chairman and left with a reduced corporate stake of about 10 percent, which allowed the company to use his name in licensing.
"I don't like the 'b' word," Trump said on the witness stand of a New Jersey bankruptcy courtroom in 2010.
Trump has often celebrated his foresight for pulling out of his Taj Mahal casino on the New Jersey coast, saying during the debate: “I had the good sense to leave Atlantic City. I left Atlantic City before it totally cratered. And I made a lot of money in Atlantic City, and I’m very proud of it.”
Some of Trump's glitziest real estate developments were unveiled amid national economic downturns, during which many business leaders suffered from bad investments, and his Atlantic City deals came at a particularly grave time for the coastal mecca. "Every company virtually in Atlantic City went bankrupt," he said Thursday night.
But Trump’s multiple spells in bankruptcy court, and the little effect they have played on his abundant wealth, highlights the stiff gap between how businesses and consumers are treated amid financial strife. The Trump businesses, as with many companies, were afforded significant leeway in the hope they could recoup those massive debts.
“Bankruptcy certainly is a scarlet B on the consumer side, but it is acceptable in business,” said Dan LeBert, executive director of the National Association of Consumer Bankruptcy Attorneys. “It’s a lot different when businesses go through these proceedings than when someone is fighting to keep their home.”
He bought Trump National Golf Course in Los Angeles in 2002, after the previous operators filed for bankruptcy following a landslide that sent the 18th hole sliding in to the Pacific Ocean. Trump National Doral Golf Course in Florida was purchased out of bankruptcy in 2012
Tom Hamburger contributed to this report.
