The Trump Organization faces the risk of having loan terms squeezed or having to sell off assets to get cash.
The Trump family company has to handle more than $ 400 million of debt coming due in the context of real estate difficulties due to the economic recession. The company’s financial profile could be even more challenging if US President Donald Trump is re-elected, due to the complexity, moral difficulty, and political trouble of lending to an incumbent president.
Compared with the high-quality assets available, the Trump Organization’s debt is not heavy. This company is also still generating large cash flows from operating operations and asset sales. However, the commercial real estate loan market is facing difficulties.
“Capital is still ready for the right deals. But the environment is getting more and more challenging”, commented Steven Buchwald – Director of Mission Capital Advisors. His company specializes in helping to finance commercial real estate deals.
Trump’s debt deals could put him under more scrutiny from rivals if re-elected. Democrats have said this debt block may affect the way Trump operates the economy. They once raised the president’s financial problems after the New York Times published tax records and debts that Trump stood under guarantee.
House of Representatives Speaker Nancy Pelosi has called Trump Organization debts a national security issue. Meanwhile, the company dismisses these concerns, asserting that Trump is not involved in business decisions as president, despite owning nearly all of his assets.
The WSJ said that there are very few financial institutions willing to work with Trump before his election, due to the complicated financial history of the US President. The two banks willing to do this, Deutsche Bank and Ladder Capital Corp, have both been in trouble lately, making it harder for them to lend.
Another challenge comes from the Trump Organization’s own assets. The company’s office buildings are concentrated in Manhattan – an area hit by the pandemic and struggling to recover. Golf courses and hotels have also been hit by slowing tourist arrivals, blockades and slowing economic growth.
One of the first debt coming due is $ 100 million of Trump Tower, in September 2022. Other liabilities associated with other businesses, such as hotels or golf courses, are also strongly affected by the pandemic. Deutsche Bank lent $ 125 million to the Trump National Doral Miami golf resort, due in 2023 and $ 170 million to the Trump International Hotel in Washington, due in 2024.
The fact that Trump retains ownership of the business as President has long been criticized. They feared he might make a decision in his favor, and that the lender might have another motive while Trump was in the White House. “The people who are willing to pump money to refinance Trump debts are the people who don’t really care about the money,” said Richard Painter, a former White House lawyer under President George W. Bush. they want something else from Donald Trump. “
The Trump Organization said it has worked to reduce conflicts of interest, such as donating profits from foreign governments to the Treasury Department. They are also not worried about the current debt. Eric Trump – who ran the company’s day-to-day operations when his father was President – said debt management was their top priority. “We will never be a big debt bearer,” said Eric Trump mid-year.
In recent years, the Trump family has added tens of millions of dollars from property sales. Figures from his loan records show that some of Trump’s high-value assets were not performing as expected during his time as President. Net cash flow from Trump’s commercial properties could only reach $ 12 million this year, according to research firm Trepp. The occupancy rate is only 82%.
Since income from these properties is the main determinant of loan size, the Trump Organization may have to reduce debt and focus more on stocks.
Trump’s loans worried many Wall Street investors, including large funds such as Fidelity Investments, Vanguard Group, Neuberger Berman Group, TIAA, Morningstar. They have been involved in six bond deals, including loans from Trump.
Real estate devaluation also affects lenders like Ladder. Earlier this year, they were required to add additional deposits, prompting the company to reduce short-term loans, sell off loans, and issue more shares to get cash. In July, CEO Brian Harris said the company was “preparing for a strong one-year recession”.
Deutsche Bank – a major lending institution different from Trump’s – in 2016 rejected Trump’s offer (then a presidential candidate) to increase Trump National Doral Miami lending. Recently, this bank had legal trouble with US officials. In July, they were fined $ 150 million for some administrative errors. Deutsche Bank is also under close scrutiny with money laundering controls.
The Trump Organization has had several talks with the German bank earlier this year about the possibility of debt rescheduling when pandemic occurs. However, the results of these negotiations were not disclosed.
Ha Thu (according to WSJ)