Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, June 16, 1990 TAG: 9006160168
SECTION: BUSINESS PAGE: A5 EDITION: METRO
SOURCE: The Washington Post
DATELINE: NEW YORK LENGTH: Medium
The flamboyant tycoon, short of cash and unable to borrow more because of feuds among his lenders, failed Friday to make about $25 million in payments due on junk bonds he issued to finance his Trump Castle Casino.
The missed deadline, which put Trump legally in default on the securities, marks the first time the publicity-conscious mogul has failed to make timely payments to bondholders who helped him finance his three Atlantic City casinos.
Although Trump still has a 10-day grace period to make good on the bonds before he can be taken to bankruptcy court, bankers and financial analysts said his failure to pay the interest and principal has already complicated his financial plight and signals that his difficulties are likely to get worse before they get better.
Friday's default, while a worrying sign, proves only that Trump is currently short of cash. It does not mean that his various businesses and properties, when sold, would not bring in enough money to cover his debts.
"The distinction that must be drawn is between being illiquid, meaning not having enough ready cash, and insolvent, which is not having the money at all," said James D. Grant, a veteran Trump-watcher and editor of a bond-market newsletter.
But Trump faces a serious risk that his approximately 50 bank lenders, to whom he owes about $2 billion, will be unable to work out a deal among themselves to refinance his operations.
Trump's four principal bankers - New York giants Citicorp, Bankers Trust of New York Corp., Chase Manhattan Corp. and Manufacturers Hanover Corp. - have been unable to persuade several dozen smaller banks to go along with a tentative agreement reached last weekend that would have provided Trump the additional $60 million in new loans and suspended interest payments on some of his old loans in return for various new forms of collateral.
Trump had enough cash to make a $16 million interest payment due Friday on junk bonds floated by his Trump Plaza Casino, which is the only one of his three Atlantic City gambling palaces that is on firm financial footing.
He did not have enough to pay $16.5 million in interest due on two issues of Trump Castle bonds or to buy back about $8 million of Castle bonds as he had promised when he floated the securities.
by CNB