Donald Trump is in a tough spot financially as deadlines loom for him to pay off over half a billion dollars in judgments.
A New York appeals court judge denied Trump's request for more time to settle a $454 million judgment from a civil fraud case. Meanwhile, a federal judge is set to rule on whether Trump can delay payment or make a partial payment on an $83.3 million judgment from a defamation case filed by E. Jean Carroll.
The rush of activity in the past week highlights the difficulties that Trump is encountering in gathering the total of $537 million in judgments. His lawyers have informed judges that it could cost him an extra $104 million to put up the required bonds, as they calculated the fees he would have to pay. To alleviate the situation, Trump may have to sell off some of his properties in urgent situations to quickly raise funds, explore options in the capital markets, or seek alternative sources of cash. Just last month, Trump started promoting $399 gold sneakers.
Trump sneakers
Trump sneakers
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Adam Kaufmann, a criminal defense lawyer, described the situation as a significant challenge. He mentioned that Trump is facing a difficult dilemma.
This cash shortage situation is testing Trump's public image as a wealthy and successful businessman known for his ability to navigate legal and financial difficulties. This reputation helped him win the presidency in 2016.
The potential future Republican presidential frontrunner for 2024 may find themselves in significant debt to a bank, donor, or other financial source. The uncertainty surrounding Trump's future income is also compounded by the four criminal charges he is currently facing.
Carroll's lawyers referenced Trump's mounting legal troubles on Thursday as they advised the judge to deny Trump's plea to postpone or reduce the bond amount in her case.
"If Trump is found guilty of even some of the 91 felony charges against him, it could greatly affect his ability to pay off the judgments. Even before any conviction, Trump's 'brand'— considered his most valuable asset, but not easily used to settle a civil judgment— might suffer due to the legal troubles he is facing," as stated by Carroll's lawyers.
Trump's reputation for not fulfilling payments to lawyers and others could impact his capacity to raise funds. He could either provide the cash himself or opt for an appeals bond, typically supported by cash or easily tradable securities. However, the substantial size of the judgments complicates the process, according to underwriters.
It is not clear how much cash Trump currently has available. Last year, he stated under oath that he had over $400 million in cash. However, the New York attorney general's office reported that in 2021, Trump's 30% ownership in a partnership with Vornado, a real estate investment company, was valued at approximately $200 million. It is important to note that Trump would need to sell his stake in order to access this money, and it is unlikely that he would use up all of his cash reserves as his properties have ongoing expenses such as bills and payroll.
In response to the New York attorney general's case, Trump offered to provide a $100 million bond, but this proposal was rejected by the appeals court judge. The deadline for the judgment in the Carroll case is approaching rapidly, with less than two weeks remaining unless the judge grants Trump's request for an extension or reduction in payment. If Trump does not settle the civil fraud judgment by the end of the month, there is a possibility that the state may take action to seize his properties.
The sheer size of the judgments raises practical questions about how Trump could feasibly come up with the cash. On Wednesday, the appeals court judge lifted one condition at Trump’s urging – a ban that prohibited him from taking out loans from financial institutions regulated in New York.
This decision opens up the possibility for Trump to seek financial support from big lenders.
Many of the world’s biggest banks stopped lending to Trump decades ago. Deutsche Bank, which he turned to repeatedly to finance property deals, ended its relationship with Trump after January 6, 2021. Signature Bank, another past lender to Trump, also ceased doing business with him after the attack on the US Capitol.
In 2022, Trump sought a $100 million loan from Axos Bank, a California lender, to refinance Trump Tower. However, it remains uncertain whether the bank would be willing to lend to Trump again. CNN attempted to reach out to the bank and its chief executive, Greg Garrabrants, but did not receive a response.
Lawyers suggest that Trump might attempt to extract equity from specific properties. However, this could be challenging if there are existing mortgages or loans, as banks would be wary of being second in line to receive payments.
Another issue that might arise is that the Trump Organization ceased to create personal financial statements for Trump two years ago. As a result, a lender would have to review the finances and might request property appraisals, which can further delay the process.
Fire sale
Trump’s attorneys said without postponing the judgments Trump may have to sell some of his properties in what could amount to a fire sale.
Kaufmann mentioned that selling a property in the current market could be challenging. Even if the market was better, potential buyers might still push for strict terms sensing an opportunity.
Since Trump has owned his properties for a long time, selling them could lead to a significant tax bill unless he can offset it with any losses.
Jeremy Saland, a criminal defense attorney, mentioned that there are practical issues when it comes to property sales. He raised concerns about the number of properties that would need to be dealt with in such situations.
Any sale would need to be approved by the Trump Organization's court-appointed monitor, retired judge Barbara Jones, who will continue in her role for three years. Additionally, transfers exceeding $5 million must be disclosed to Jones.
Securing a bond is another option in the process. Appeal bonds, which make up only one percent of the bond business according to the Surety & Fidelity Association of America, are not very common. The need for an individual to secure such a large bond is also rare.
Securing a very large bond can be more challenging for an individual compared to a company, according to David Shick, the co-founder and president of ProSure Group, a bond securing broker.
Underwriters typically prefer cash or easily sellable assets as collateral for the bond. However, if the bond issuer offers property as collateral, it could potentially increase the overall cost. For instance, to secure a $100 million bond, the issuer may need to provide $200 million worth of assets to cover the expenses of selling the property in case the client loses an appeal, explained Shick.
It is possible for several insurance carriers to come together to cover large judgments, according to Shick. He mentioned that this is not common, but the size of the bond is also unusual. He added that the court will ultimately decide what they are willing to accept.
When a company is considering supporting a significant bond, especially if the collateral is not easily converted into cash like property, Shick emphasized that ultimately, it boils down to making a business decision based on the trustworthiness of the party involved.
Editor's P/S:
The article paints a grim picture of Donald Trump's financial situation. With over half a billion dollars in judgments looming over him, Trump faces a daunting task in gathering the necessary funds. His reputation as a wealthy and successful businessman is being tested, and his ability to navigate legal and financial difficulties is being called into question. The potential future Republican presidential frontrunner for 2024 may find themselves in significant debt, further complicating his political ambitions.
The article also highlights the practical challenges that Trump faces in raising the necessary funds. Selling off properties could lead to a significant tax bill and potential legal complications. Securing a bond is another option, but the sheer size of the judgments makes it a rare and expensive undertaking. The article leaves the reader wondering how Trump will ultimately resolve this financial crisis and what the implications will be for his public image and political future.