Posted on 02/12/2016 9:07:05 AM PST by AndyJackson
In an effort to take out frontrunner Donald Trump, Republican presidential candidates have pelted Trump with criticism over his multiple trips to federal bankruptcy court. That criticism was on full display in CNN's Republican debate Sept. 16. Most notably, former Hewlett-Packard CEO Carly Fiorina criticized Trump's history of bankruptcies in his businesses.
"You know, there are a lot of us Americans who believe that we are going to have trouble someday paying back the interest on our debt because politicians have run up mountains of debt using other people's money," Fiorina said. "That is in fact precisely the way you ran your casinos. You ran up mountains of debt, as well as losses, using other people's money, and you were forced to file for bankruptcy not once, not twice, four times."
Trump doesn't deny that four of his businesses have filed for bankruptcy. He argues, however, that filing for bankruptcy is a common business decision, and he was smart to make the moves when he did.
"Hundreds of companies" have filed for bankruptcy, Trump said earlier in the debate. "I used the law four times and made a tremendous thing. I'm in business. I did a very good job."
Trump's four bankruptcies were Chapter 11 reorganizations (named for its location in federal bankruptcy code), which are designed to restructure businesses without shutting them down completely. The purpose is to "save" the business, as opposed to other forms of bankruptcy which would liquidate the company, said Michael Venditto, a partner at the ReedSmith law firm who has extensive experience with Chapter 11.
Because they keep coming up, we decided to outline Trump's four bankruptcies. We also talked to some finance experts, who told us Trump is correct that Chapter 11 reorganization is not always the result of bad business decisions.
Bankruptcy 1: The Trump Taj Mahal, 1991
The first bankruptcy associated with Trump was perhaps the most significant in terms of his personal finances, according to news reports at the time. He funded the construction of the $1 billion Trump Taj Mahal casino in Atlantic City, which opened in 1990. By 1991, the casino was nearly $3 billion in debt, while Trump had racked up nearly $900 million in personal liabilities, so the business decided to file for Chapter 11 reorganization, according to the New York Times. As a result, Trump gave up half his personal stake in the casino and sold his yacht and airline, according to the Washington Post.
Bankruptcy 2: Trump Plaza Hotel, 1992
Trump acquired the Plaza Hotel in New York for $390 million in 1988. By 1992, the hotel had accumulated $550 million in debt. As a result of the bankruptcy, in exchange for easier terms on which to pay off the debts, Trump relinquished a 49 percent stake in the Plaza to a total of six lenders, according to ABC News. Trump remained the hotel's CEO, but it was merely a gesture -- he didn't earn a salary and had no say in the hotel's day-to-day operations, according to the New York Times.
Bankruptcy 3: Trump Hotels and Casinos Resorts, 2004
Trump Hotels and Casinos Resorts filed for bankruptcy again in 2004 when his casinos -- including the Trump Taj Mahal, Trump Marina and Trump Plaza casinos in Atlantic City and a riverboat casino in Indiana -- had accrued an estimated $1.8 billion in debt, according to the Associated Press. Trump agreed to reduce his share in the company from 47 to 27 percent in a restructuring plan, but he was still the company's largest single shareholder and remained in charge of its operations. Trump told the Associated Press at the time that the company represented less than 1 percent of his net worth.
Bankruptcy 4: Trump Entertainment Resorts, 2009
Trump Entertainment Resorts -- formerly Trump Hotels and Casinos Resorts -- was hit hard by the 2008 economic recession and missed a $53.1 million bond interest payment in December 2008, according to ABC News. After debating with the company's board of directors, Trump resigned as the company's chairman and had his corporate stake in the company reduced to 10 percent. The company continued to use Trump's name in licensing.
So four Trump companies filed for Chapter 11 reorganization. Is that as big a deal as Fiorina says?
Risky business
While it would be better to avoid a situation where Chapter 11 reorganization is necessary, filing for bankruptcy can be a "sound business decision" when the company is facing serious financial problems, Venditto said. It's better than the business shutting down completely.
"However, the source of the financial problems varies from case to case," he said. "Sometimes it is the result of circumstances beyond the control of the business. Sometime it caused by poor judgment. More frequently, it is a combination."
Trump's four bankruptcies all happened within the past 25 years. That's a lot, said Stephen Lubben, a leading expert in corporate finance and professor at Seton Hall School of Law. But to be fair, the gaming industry has been struggling the past few years, he added, and three out of four of Trump's bankruptcies were tied to casinos.
It's not fair to put all the blame on Trump for the four bankruptcies because he's acting as any investor would. Investors often own many non-integrated companies, which they fund by taking on debt, and some of them inevitably file for bankruptcy, said Adam Levitin, a law professor at Georgetown University.
He added that people typically wouldn't personally blame former Republican presidential candidate Mitt Romney or investor Warren Buffett for individual failures within their investment companies, Bain Capital and Berkshire Hathaway, respectively.
"The only difference is that Trump puts his name on his companies, which means people associate them with him, but he's not at all the leader in the bankruptcy space," Levitan said. "These bankruptcies were not defining moments for Trump and shouldn't color our view of him."
Our ruling
Fiorina said Trump was "forced to file for bankruptcy not once, not twice, four times."
While it is accurate that Trump filed Chapter 11 bankruptcy four times, Fiorina's statement doesn't tell the whole story. In context, Fiorina's phrasing suggests Trump was personally responsible for the failures of these businesses, but in reality, much was out of Trump's control -- such as a struggling casino industry. But Trump is certainly not blameless.
We don't know the details of the terms except that generally Trump lost a significant part of his personal stake in each.
We keep hearing slams against Trump for stiffing his bankers. Here are the details.
No risk, no reward. The guy has hit a lot more home runs than strike outs.
The habitual liars at Polticfax are now “credible” because they say something “conservative” campaign bots what to hear?
It is simply "facts." If the facts as related are incorrect, then please cite a source and correct them.
campaign bots what to hear?
What they hope to hear:
prez hil edmund clinton/snarky(me)
Trump's four bankruptcies were Chapter 11 reorganizations (named for its location in federal bankruptcy code), which are designed to restructure businesses without shutting them down completely. The purpose is to "save" the business, as opposed to other forms of bankruptcy which would liquidate the company, said Michael Venditto, a partner at the ReedSmith law firm who has extensive experience with Chapter 11.
In other words, no one was stiffed out of money. Everyone was paid. Trump paid. Despite these business losses, the built an empire worth billions.
Reorganization Chapter 11 is NOT 'Walk Away from Problems Chapter 7'.
Having worked in real estate before, during and after the crash, I have very little sympathy for the banks.
On several occasions, rather than act on the short sale of a property, they actively pushed the homeowner into bankruptcy.
In once instance, I had $150,000 in cash sitting at a title company to purchase the home but Chase & Wells Fargo decided to allow the home to go to auction instead because the price point of the home wasn't worth their time.
The house sold at auction for something like $80,000.
In another case, USAA would not work with the home owner to let him out of the mortgage and said they would simply add any deficiency from the mortgage to his credit cards.
At the time, USAA stood to lose a few thousand dollars at the most. Instead, the homeowner filed bankruptcy causing USAA to lose much more.
IMO, some of the banks should have been allowed to fail.
He had his own money on the line, and lost money, and other assets in these bankruptcies. Presumably the banks got their money at the end of the day.
I don’t see it as a negative that Trump has experience with Chapter 11 reorganization. This whole country is headed into Chapter 11, so the more experience the better. LOL
By your sources you are know. You want to get in bed with habitual liars, don’t be surprised your reputation picks up fleas.
The question in my mind is how did Trump’s experience during that period of time and in that industry compare with others.
I am going for Cruz but Trump is right on this one.
He didn’t go to uncle sugar for bailouts like obozo’s crony capitalists like government motors and AIG did, either.
any media person who criticizes a legitimate business owner who puts their money on the line and makes like they could do better should quit their job and prove it.
Politicians who obtain and spend other peoples money would not last 2 minutes if they had to prove they make sound decisions, and never exceed budgets, and always deliver stellar returns on money received.
sound bite’s wont work with The Donald as he will Bite Back...
So Bankruptcy is a sign of a business man with good business judgement?
wow the spin is getting better and better
I’m a Cruz supporter and Trump’s bankruptcies have never bothered me one little bit. Capitalism requires a risk of failure along with a chance of success.
Name me a poker player that has never lost a hand. Sometimes you make bad decisions in business, and sometimes you just can’t win a hand you are dealt.
No big deal.
Precisely the point. While we don't have the final details on all of the restructuring, generally Trump would have gotten longer to pay off the loan and lower interest rates (which the bank would have been happy to have given the lousy business environment they faced).
They can write off a bankruptcy.
I like Cruz, but Carly should go write another love letter and speech to muslims, and give it a few weeks after the next big attack like she did after 9/11.
while i was giving blood and firemen friends were dying.
it’s true. Look it up. She’s filth.
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