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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