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For starters, he will cede a half-interest in the casino to owners of the $675 million in junk bonds that financed its construction. (Their bonds are now worth about 50 cents for every dollar they invested.) In exchange Trump will win a substantial reduction in his annual interest payments. At the insistence of the largest bondholder, financier Carl Icahn, Trump must meet rigorous financial-performanc e targets within the next year or turn over control of the enterprise to the creditors. If he meets the goals and makes his interest payments promptly, however, his ownership stake will climb back to 80%.
It is not at all clear that Trump will be able to make that bounce. Atlantic City was already booked beyond capacity in one-armed bandits, roulette wheels and blackjack tables before he opened the Taj in April 1990. Instead of drawing more gamblers to the seedy little gambling haven 2 1/2 hours south of New York City, the Taj has cannibalized patrons from other Atlantic City casinos, including Trump's own.
How did a onetime builder of low-income housing become one of America's most dazzling success stories and nearly its most spectacular bankrupt? Trump's financial humbling is rooted in the speculative frenzy of the '80s. Behind every over-reaching mover and shaker, after all, were banks and investment houses looking for the fast hit, the big score. Trump, whose developments were frequently completed on time and on budget in an industry infamous for construction delays and cost overruns, won the confidence of investors early. When the Northeastern real estate boom took off, Trump found he had unlimited credit. As he later remarked in his best-selling 1987 autobiography, The Art of the Deal, "It's funny what's happened: bankers now come to me, to ask if I might be interested in borrowing their money."
Unlike much of what Trump says, that statement wasn't just hype. For 10 years, as the brassy developer rattled the china from Manhattan to Palm Beach with his unbridled hubris and glitzy style, squadrons of bankers indeed lined up to finance his titanic ambitions. Bigger, bolder and flashier were his trademarks -- from the imperially appointed Trump Princess, to the outrageous getups on the Trump Tower doormen, to his plans to build the world's tallest building in an abandoned railyard -- and the bankers lapped it up. Not many people can borrow $100 million over the phone, but he did. Bankers Trust gave the Donald that much without even asking for collateral. No wonder he boasted that he loved risks: others were so willing to take them for him.
While millions of casual observers were dazzled by the glitter of his empire, few understood that Trump's fortune was built on a growing mountain of debt. The moneymen who did understand seemed not to care. "He mesmerized the bankers," recalls a top Trump employee. "They fell for the luster and got greedy."
Who else boasted that he had done more for the city of New York than anyone else (thus dismissing some pretty worthy company)? He claimed that whenever Queen Elizabeth visited these shores, Buckingham Palace asked to borrow his helicopter -- emblazoned, of course, with his name -- because it was the best in the country. Asked to list a credit reference once, he put down "John Cardinal O'Connor."