Unless you have been in an isolation tank for some time, you know that Donald Trump is running for President of the United States. He of the iconic hair is particularly sensitive to discussions about bankruptcy, as his operations have declared bankruptcy multiple times. While the Donald may not like it, it's fair to ask how a man who wants to be President can tout his business acumen and ability to straighten out the country while having filed for bankruptcy not once or twice, but several times.
Here's why the question annoys the Donald: Donald Trump has never filed for personal bankruptcy. However, his operations have filed for Chapter 11 bankruptcy four times between 1991 and 2009. There is a distinct difference.
As opposed to the Chapter 7 liquidation bankruptcies generally used by individuals, Chapter 11 bankruptcy allows large corporations to stay in business while reorganizing their debts. If a corporation is structured correctly, personal assets should be shielded from the bankruptcy proceedings.
Trump's four bankruptcies, in 1991, 1992, 2004, and 2009, are all in connection with Trump's hotel and casino holdings in Atlantic City, which have tanked in value along with the local economy.
- 1991 – The first of Trump's bankruptcies is the only one where Trump's personal assets took a major hit. The bankruptcy was driven by the debt on Trump's Taj Mahal, which was financed with junk bonds that carried a 14% interest rate. Both the economy and the interest in Atlantic City gambling sank shortly after the Taj Mahal was completed, leaving Trump's corporation with $3.4 billion in debts.
Trump had too much personal interest in this venture, and ended up having to relinquish half of his ownership, sell his Trump Shuttle airplane and Trump Princess yacht, and effectively be put on a budget by his creditors. Trump learned from that episode, and took greater care to shield his personal wealth. We hate to contemplate a future where President Trump is forced to sell Air force One to pay the country’s debts.
- 1992 – This bankruptcy was a byproduct of the same economic conditions as 1991, this time involving the Trump Plaza Hotel. The deal was similar in nature to 1991 with less personal exposure. Citibank ended up with 49% interest in the hotel. Trump ended up with no salary but remained as CEO and received a fairly lenient repayment plan.
- 2004 – In 2004, it was the Trump Hotels and Casino Resorts filing for bankruptcy with $1.8 billion in debt. Trump's share was reduced to 25%, leaving him without the controlling interest. In return, the Donald received lower interest rates and a loan of $500 million targeted for improvements.
- 2009 – The real estate crash took a large toll on Trump's real estate holdings, and upon missing a large bond interest payment, Trump Entertainment Resorts was off to bankruptcy court. Trump and his board of directors fought over the restructuring terms, culminating with Trump's resignation and a continuing 10% ownership interest.
Budding Trumpologists may like to add the Trump International Golf Club Puerto Rico to this list, but its filing for bankruptcy in July of 2015 does not count. The filing corporation uses Trump's name through a licensing agreement, but Trump has no ownership interest in the company.
Trump has survived quite nicely, with a net worth of more than $10 billion according to his presidential filing paperwork — although a recent Forbes estimate put the value at just over $4 billion. While the bankruptcies were able to save the corporation each time, Trump creditors and the bondholders did not fare quite as well.
Trump has a history of over-extending his companies and getting into unmanageable debt, while maneuvering out of personal danger. Will he be so cavalier with the reigns of a country? That is a Machiavellian tendency to consider, in a political and policy sense, before making your decision on the Republican hopeful’s candidacy. Assess the risk before you enter the voting booth, but think of the fun we would get from a Trump administration.