June 25, 1990, David Johnston, Knight-Ridder NewspapersCHICAGO TRIBUNE
Bankers are taking such complete charge of Donald Trump`s business and personal finances that they are putting him on an allowance, confidential documents made available to the Philadelphia Inquirer show.
The documents, dated Friday and made available over the weekend, show that banks, as conditions for lending Trump $65 million more to ease his cash crunch, will name two executives to run the Trump empire, bar him from moving money among his companies without the banks` permission and limit him to a $450,000 allowance for ''personal and household spending.''
That`s $450,000 per month, not per year.
The $5.4 million personal budget for this year results from a month of hard, dawn-to-dusk negotiations with lenders.
At least 50 banks from Newark, N.J., to Dresden, East Germany, to Tokyo are demanding radical spending cuts, both in Trump`s personal life and his business empire.
Trump, revered by many as the greatest living hero of economic freedom, is submitting to the bankers` financial shackles because he cannot come up with enough cash to pay interest on more than $3.3 billion he borrowed from banks and junk bond buyers.
By making new loans, the banks hope to get past the immediate financial crisis, giving them time to sell off unprofitable pieces of the Trump empire at better than fire-sale prices.
In effect, Trump is engaged in a privately negotiated bankruptcy at which the banks are presiding.
When an accord is reached, and if the downsized Trump Organization then can pay its bills, Trump will have escaped the financial and emotional consequences of having a U.S. Bankruptcy Court judge liquidate his assets. Indeed, the developer who says deals are his art form is likely to emerge from successful negotiations wealthy, though not fabulously so.
Ten days ago, Trump defaulted on $325 million of Trump Castle Casino Resort mortgage bonds for the Atlantic City, N.J., property. He has until Tuesday to cure the default without risk that bondholders can force the casino into bankruptcy court. Sources familiar with the talks expressed optimism Sunday that the $22 million principal payment plus $20 million in interest would be made by Tuesday or perhaps within a few days after that.
Trump and the banks also have agreed that in years to come the Trump lifestyle must be scaled back drastically.
This year`s $5.4 million personal allowance will be cut to $4.5 million next year and $3 million annually starting in 1992. Trump will be required to produce receipts for all personal and household expenses.
That is certain to put a serious crimp in a free-spending lifestyle that included a 284-foot yacht that he says is too small, a Boeing 727, a helicopter and a Florida mansion with 118 rooms.
Interest payments and upkeep on his Florida place, Mar-A-Lago, cost about $2 million a year-and it is his third home. He also has a Trump Tower penthouse and a Connecticut mansion.
Obviously, some of these trophies will have to go. The Trump Princess yacht, the jet and the copter already are for sale. Trump has insisted in interviews that he never would sell Mar-A-Lago, but that was before bankers encamped in his office last month.
He also will get a salary, not to exceed $200,000. The documents suggest that the salary is an annual figure, but it may be monthly, in which case he would receive up to $2.4 million per year, before taxes, that he could spend without requiring the approval of his bankers.
There is no provision listed for cost-of-living increases, and the tentative agreement bars Trump from receiving fees for being a director of any of the dozens of corporations and partnerships solely owned by him. He cannot be paid bonuses, not even for outstanding performance.
On the business side of the negotiations, the banks have agreed to let Trump go into the casino business in Las Vegas, provided there is outside financing they deem acceptable.
But banks also demanded concessions, and the nature of them, as revealed in the documents, shows that like many entrepreneurs Trump operates his umbrella company without strong financial controls and little or no long-range planning.
One provision, for example, requires Trump to ''install and maintain a system of accounting controls and business planning, including appropriate staffing, by no later than Sept. 30, 1990.''
According to the documents, Trump will not be allowed to transfer money between the dozens of legally separate but economically linked companies that are solely owned by him without the written permission of the banks. Likewise, he will not be allowed to sell assets, sign leases or take on new debt without the banks` permission.
https://qr.ae/pNn0ms
Login
FAQ
Search
sooz06
~ Sooz
