American Express never really wanted a 282-ft. yacht. Bankers Trust isn't sure what it will do with the Grand Hyatt in midtown Manhattan, especially in the middle of a recession, nor is Manufacturers Hanover exactly giddy about owning the Regency Hotel in Atlantic City. But then Citicorp is not exactly cut out to be a retailer or an airline operator, either.
Meet Donald Trump's bankers. Like the characters in the fairy tale The Emperor's New Clothes, a gaggle of major financial institutions has finally been forced to admit, after lending Trump billions of dollars, that there's a lot less to the emperor -- or at least his empire -- than the banks had believed. Not quite nine months after bailing out Trump with a rescue package that gave him $65 million in new loans and eased credit terms on his bank debt, Trump's bankers last week stopped the game. Already more than $3.8 billion in the hole and sliding perilously close to a mammoth personal bankruptcy, the brash New York developer had no choice but to accept the dismantling of his vast holdings. Meeting round the clock at secret Manhattan locations, Trump's lawyers and bankers by week's end had begun to hammer out a complex series of agreements on the distribution of some of his assets.
While many of the details remain to be settled in coming weeks, the broad outlines are clear -- and despite his desperate situation, Trump, who has always prided himself on his mastery of dealmaking, once again seems to have come up with a strong hand. Pooh-poohing any notion that he was cornered, Trump insisted last week that the talks were friendly. "I have a great relationship with the banks," he said, adding airily, "The 1990s are a decade of deleveraging. I'm doing it too."
That's one way of describing what has befallen him. While he will give up his beloved Trump Princess yacht, the Trump Shuttle, the Regency, his half- interest in the Hyatt and his 27% interest in the Alexander's store chain, he will retain the Manhattan trophies he values most: the Plaza Hotel, Fifth Avenue's Trump Tower and a valuable tract of undeveloped Hudson River waterfront. He'll also keep his lavish Mar-a-Lago estate in Palm Beach, Fla., which features a 118-room mansion and a nine-hole golf course.
Most important, Trump has eluded the specter of personal bankruptcy by whittling his debt down to more manageable proportions. The amount of debt that Trump guaranteed personally -- several hundred million dollars -- is breathtaking even by the standards of the '80s. In negotiations so far, the banks have agreed to secure some of that debt with the Plaza and other assets.
Trump has bet his future most heavily on Atlantic City by holding on to his three casinos there: the billion-dollar Trump Taj Mahal, the Trump Castle and the Trump Plaza Hotel and Casino. Considering his present straits, the move may make sense. After all, he still must come up with millions in annual interest payments. As he once said of the casino business, "Most of all, I like the cash flow."
Even with the worst behind him, Trump will be forced to file for bankruptcy protection for the struggling Taj Mahal casino next month. Like a growing number of corporate debtors, though, Trump is not flying blind into bankruptcy court: he has already negotiated most of the terms of the Taj reorganization.