Bankruptcy or seizure? Trump is in financial trouble

All his life, Donald Trump has sold himself as an insanely successful businessman swimming in money. Forbes recently estimated his fortune at 2.6 billion, but that fortune is tied up in real estate. That is difficult, because on Monday Trump has to cough up almost half a billion dollars, which he does not have in liquid assets. He can no longer find financiers who trust him enough for such an amount.

In February, a judge in New York ordered Trump to pay $454 million in damages (including interest) because he lied for years about the value of his assets to extract more favorable interest rates from financial institutions.

He was given until March 25 to cough up that enormous amount. On Monday, his lawyers sounded the alarm. Trump doesn’t have that much cash, they said, and no matter what we try, no one wants to guarantee him such a fortune.

However, there are companies that do that, declaring themselves guarantors (for a hefty fee) to pay a debt in place of their contractor if necessary, and later recover that amount from him. But it is such a huge amount and Trump has such a bad reputation for paying back that he was rejected by more than thirty firms and wealthy businessmen. It still worked for the compensation of 83.3 million dollars to the columnist he assaulted and defamed, but it does not seem to work for this higher amount.

Trump’s team has asked an appeals committee to exceptionally be allowed to wait to pay until after the appeal against the conviction. The chance that that request will be granted is small. However, the committee could perhaps reduce the amount to be coughed up immediately.

Much richer on paper

Trump became much richer on paper on Friday, now that Trump Media – the company behind his social medium Truth Social – is going public in a merger with Digital World. Trump owns 60 percent of the shares. At current rates, that is worth about three billion dollars.

Yet that does not solve his payment problem. After all, such a merger includes a ban on selling shares in the first six months. Even if Trump were able to negotiate an exception, he cannot suddenly put those shares up for sale: the value of the new listed company is so strongly linked to his person that such a signal would immediately cause the price to collapse. This does not help Trump’s acute cash problem.

Trump has three options on Monday. Or he could sell a large part of his real estate in haste, but such a hasty emergency sale would be a huge blow to his pants: prospective buyers also follow the news and they know that Trump does not have time to play hardball.

Political damage

A second option is that he files for bankruptcy, in his own name or on behalf of his companies. If he does, a long and complex process will begin to determine which creditors are priority. In the meantime he doesn’t have to pay anything. In the short term, that is a solution, which he used repeatedly in the 1990s when his casinos in Atlantic City suffered heavy losses. Ultimately, his creditors dropped large parts of their claims against him, because he simply… too big to fail was – an unethical but successful example of Trump’s bluff poker.

But Trump has already told his advisers that he does not want to file for bankruptcy now. The political damage to his carefully constructed image would be too great. Moreover, he would lose even more control over his financial empire than is already the case: the judge recently appointed an independent guardian who must approve the most important decisions in the Trump Organization. Trump is really annoyed by that.

And so there remains option three: Trump appears insolvent on Monday, and special prosecutor Letitia James has the right to seize his bank accounts and real estate. She can do that immediately, or wait until the appeal is over. The temptation to seize immediately will be great.

The main reason not to do so is the possible political consequences. Trump pulled out all the stops last week to rail against the judge, the prosecutor and the Democratic party – “communists” who are “waging a witch hunt against him.”

The WashingtonPost quotes a source close to Trump: “Would rather than go bankrupt, he will soon see Prosecutor James arrive at 40 Wall Street with the sheriff (one of Trump’s most prestigious assets, ed.) so he can make a huge fuss about it.” Other possible targets for seizure include Trump’s gigantic private apartment spanning three floors of Trump Tower in New York, or his favorite golf resort, not far from New York.

Biden better off

An accident never comes alone. Trump’s campaign is also sputtering financially. Partly because he is skimming off his campaign to pay his legal costs (more than 10 million dollars since January 1), his campaign team only has 33 million dollars in cash. Biden’s has 71 million. If you include funds from political action committees created to promote the candidates, the difference is even greater — 42 million for Trump versus an improbable 155 million for Biden, an unprecedented amount in March of an election year.

Then there is also the group Republican voters against Trump, founded in 2020, which announced last week that it would invest $50 million to – without recommending Biden – advertise against Trump. Trump’s campaign therefore urgently needs additional resources to restore the balance. Trump hopes to achieve this through an angry reaction among his fans to what he calls “the witch hunt”, but he has been doing that for months.