Thursday, August 20, 2015

DavidCayJohnston. Bankers Say Trump May Be Worth Less than Zero. Philadelphia Inquirer. 16 Aug 1990.



ATLANTIC CITY — You may well be worth more than Donald Trump.
The developer who claimed that his deal-making prowess had boosted his fortune from mere millions to more than $3 billion may owe more than his empire is worth.
Trump’s bankers say his debts could outweigh by $295 million the value of his hotels, casinos, office towers, condo projects, airline and other properties, according to a report commissioned by Trump and made public yesterday.
The respected accounting firm Trump hired recently to help him rework his loans and save his cash-starved business empire arrived at the estimate of a $295 million negative net worth by first adding up estimates from Trump’s bankers on how much he could raise by selling his assets. Then the accountants subtracted the $3.2 billion Trump owes banks and the bondholders who helped finance his casinos.
The bankers, who have loaned Trump $1.9 billion, offered various estimates on sales prices. But even with their most optimistic estimates of his assets, the banks figure Trump is worth no more than $282 million.
Trump’s own estimates, included in the document, put his net worth at $1.4 billion.
The accounting firm that prepared the report, Kenneth Leventhal & Co., estimated, largely on the basis of how much cash Trump’s businesses generated, that the empire was worth $480 million to $760 million more than Trump’s debts, assuming he retained ownership of the businesses and could keep operating them.
All the estimates placed generous values on some Trump assets and, thus, might overstate Trump’s wealth. For example, Trump, Leventhal and the banks valued his Boeing 727 jet and his Super Puma helicopter at $10 million each. But one airplane broker said yesterday that the market was flooded with the aging 727 tri-jets and that Trump’s jet probably was worth only $5 million. Two helicopter brokers said his helicopter might fetch less than $2 million, although a replacement helicopter could cost close to $10 million.
The Trump financial estimates assume the ship Trump Princess, which costs about $860,000 a month to operate, would fetch $70 million if sold. But because the handful of people or businesses that could afford such a yacht all know Trump is in trouble, they probably would offer a price closer to the $25.7 million Trump owes on the Princess, the world’s sixth-largest private yacht.
Other documents released yesterday show that Trump risks losing his entire empire if he fails to make a $47.25 million payment to Taj bondholders due Nov. 15. A bankruptcy filing on any of his casinos, the document stated, would allow the banks to declare all of his loans in default.
A Trump spokesman said the developer would have no comment on the documents.
The Leventhal report also mentions a variety of large debts and potential liabilities that Trump faces but that aren’t factored into the financial estimates.
For example, there are 111 lawsuits against Trump, and contractors who helped build the Taj Mahal Casino Resort in Atlantic City say they are owed at least $69.5 million. In addition, gambling activity has declined sharply at two of his three casinos.
The report does not note the $25 million that Trump owes his estranged wife, Ivana, in the event of a divorce. She has claimed rights to his fortune, which could be worthless if the bank estimates are accurate.
The Leventhal report is dated June 14, so it could not have considered the effect of the Iraqi conflict, which has raised the price of fuel for Trump’s two money-losing airlines. Higher gasoline prices also could dissuade some people from visiting Atlantic City’s casinos.
The Leventhal report said that without the deal Trump struck with banks to lend him $65 million more and to defer interest on $1.08 billion in existing loans, Trump’s bank accounts would have been overdrawn $61 million by the end of 1990.
With the new loan and other concessions by his bankers, the report projects that Trump’s empire will have $24 million cash at the end of this year, a relatively small sum for an organization with 15,000 employees.
Even a slight shortfall in revenues estimated for the casinos could wipe out such a small cash reserve.
Cash projections in the report and the size of Trump’s debts raise questions about whether Trump can meet the Casino Control Act’s requirement that he prove, with “clear and convincing evidence,” that both he and his casinos are financially stable.
This morning in Lawrenceville, N.J., the Casino Control Commission will open hearings into whether to approve Trump’s bailout deal with 70 banks.
Trump fought disclosure of the documents, but the commission decided they should be made public because they are integral to determining whether he can meet the financial-stability test. Two appellate division judges on Tuesday upheld the casino commission’s decision, and yesterday, state Supreme Court Justice Alan Handler refused Trump’s effort to overturn that decision. After Handler ruled, the commission released the documents.
“The commission has to approve this deal,” Trump attorney Nick Ribis said earlier this week.
Trump and his aides have said in interviews that the commission must approve the deal, perhaps with modifications, because his Taj Mahal, Trump Plaza and Trump Castle casinos account for more than a third of the gaming market in Atlantic City.
But if the commission were to find that Trump was not financially stable, the casinos would not close.
Instead, the Casino Control Act provides that Trump would be ousted and lose whatever ownership stake he had in his casinos. The commission would appoint a conservator to operate them while buyers are sought. The commission already has a list of suitable casino conservators, according to commission sources and gaming lawyers in private practice.
Hilton Hotels, which built the Trump Castle Casino Resort by the Bay, repeatedly has sent emissaries to Atlantic City in recent months to examine Trump’s gambling halls.
Gaming executives speculate that Steve Wynn, who heads the Mirage and Golden Nugget casinos in Las Vegas, would be interested in picking up a Trump gambling hall in such a fire sale. In an interview this week, though, Wynn vigorously asserted that he had no interest in going to Atlantic City right now.

WHAT THE TRUMP EMPIRE IS WORTH
In millions, as of April 30, 1990.

Estimated value of property
Property Debt Owed
Trump Leventhal *
Banks **
Taj Mahal
800.0
1,005.8
767.5
740.8
Trump Plaza Casino
288.1
597.8
499-599
362-592
Trump Castle
414.8
571.5
400-460
300-350
Trump Regency
72.6
68.4
72.6
60.0
Penthouse site
56.0
50.4
56.0
50.4
Trump shuttle
380.0
340.0
340.0
150-300
Trump Air (copters)
40.0
23.0
23.0
23.0
The Plaza Hotel
413.2
830.0
450-550
413-500
Trump Tower
75.0
200.0
200.0
189.0
Grand Hyatt Hotel
35.9
150.0
90-110
80-100
Westside land, NYC
157.3
308.0
308.0
120-160
NY Condominiums
193.8
222.3
222.3
177.5
Alexander’s Inc. stock
69.1
81.0
81.0
69.1
Trump residences
12.0
30.0
30.0
30.0
727 jet, helicopter
10.0
20.0
20.0
20.0
Trump Princess yacht
25.7
70.0
70.0
70.0
Unsecured debt, cash
135.2
23.0
23.0
23.0
Other assets
27.1
33.0
33.0
33.0

* Estimate by Kenneth Leventhal & Co.
** Estimate of liquidation value.

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