Overrated chief Donald Trump inflated his net worth to emerge from personal bankruptcy in 1990, according to sources and financial records seen by The Post.
Those who previously worked with him say his current $250 million civil fraud trial in New York for apparently doing the same may see him get a fair dessert.
“All the fraud trials are true,” a lender who helped bail out Trump in the ’90s told The Post, saying the former president must have had a pattern of exaggerating his net worth.
“He gave a very bright projection,” said the second lender who bailed out Trump in 1990.
“Did he push the outside of the envelope? Yes.”
Trump, 77, faces a court hearing today when a judge decides whether he and his son inflated their net worth to get better rates from banks and insurance companies.
If he loses, he faces up to $370 million in fines and is barred from doing real estate business throughout New York state.
In the 80s Donald also took financial risks and tried to overvalue his assets — with disastrous results.
Trump paid $407.5 million for The Plaza Hotel, New York’s most iconic, in 1988.
Amazingly, he borrowed $425 million to finance the purchase and put up no money of his own.
Part of it, $125 million, was a personal guarantee he would use if the risky deal went south.
Donald Trump inflated his net worth to emerge from personal bankruptcy in 1990, according to sources and financial records seen by The Post. Ron Galella/WireImage.com
The lender believes his personal worth will cover the loan.
Some of those very close to Trump advised against making a personal guarantee but it was the only way he could get the deal done, sources close to his family said.
“He did it on the recommendation of his own lawyer,” the source said.
In about a year, Trump was unable to pay the interest on the Plaza loan or the interest on his other recently acquired properties including the Trump Shuttle airline and the Regency Hotel in Atlantic City.
Lenders include Bankers Trust, Chase, Citicorp, Manufacturers Hanover, and Midlantic Corp. holds loans on many of Trump’s properties and has the right to force him into personal bankruptcy and liquidate his assets thanks to a personal guarantee, sources said.
“This is getting very close to personal bankruptcy,” explained the second lender.
By 1990, Trump had defaulted on real estate.
Trump wants a new $125 million personal loan so he can make his interest payments.
In 1990, the Trump Organization hired a chief financial officer for the first time, choosing Stephen Bollenbach to help negotiate with lenders.
“Donald would call the bank all the time and tell them what The Plaza was really worth,” said the first lender.
“He said when the rooms were converted to condos they would sell for $1,000 a square foot and we would all laugh,” said the source, believing it to be an exaggeration.
He never got the right to convert the room into a condo.
“Trump thinks I’m going to borrow $125 million in my own name and I’m going to make the Plaza that has only $10 million in net operating income grow and it’s going to make enough to pay off the mortgage and all these personal loans,” the first lender said.
The stakes are high.
“Bankruptcy would be a real stain,” the second lender said of Trump, who just a few years earlier had published The Art of The Deal in 1987.
“It will be harder for him to sell his brand.”
Some of those very close to Trump advised against making a personal guarantee but it was the only way he could get the deal done, sources close to his family said. AP
Banks remain in earnest in negotiations, and will essentially only lend him money if they can repossess his assets, lenders said.
Basically they will get the same rights that they would receive in bankruptcy.
The discussion became tense.
“When Donald said he needed $1 million a month for expenses, an [Orthodox Jewish] the lawyer got up and said, ‘Donald, shut up’ and he sat down,” the second lender said.
Lenders believe there is some value in making sure the world still thinks Trump owns these assets, so they don’t force Trump to declare personal bankruptcy if he accepts their terms.
“We say you do this or we seize your assets,” said the first lender.
Trump saw the long game and finally accepted the terms in the correct belief that when the economy recovered and with his name intact he would rebuild his reputation.
He agreed in 1990 to what today would be called a Debtor in Possession (DIP) loan, common in corporate bankruptcy, but should avoid personal bankruptcy.
Four of Trump’s companies have declared bankruptcy but he has never been personally bankrupt.
“Basically this is a DIP loan,” said the first lender.
“The expectation is that he will sell assets.”
The banks then divide the assets among themselves.
He agreed in 1990 to what today would be called a Debtor in Possession (DIP) loan, common in corporate bankruptcy, but should avoid personal bankruptcy. Getty Images
After that, Trump started acting like nothing happened.
In 1991 he paid $250,000 for a seven-carat Harry Winston engagement ring for his second wife Marla Maples.
“When he bought Marla’s ring, we said it was our money!” the first lender said.
Trump did not comply with monetary gag orders imposed by lenders because they, unknown to the outside world, controlled his assets.
Lenders in 1992 refinanced The Plaza Hotel by saying publicly that Trump retained a 51 percent interest in the hotel and the rest went to the lender.
Separately, bondholders in the Carl Icahn-led Trump Taj Mahal in 1991 agreed to a pre-packaged bankruptcy in which they controlled the casino giant. ZUMAPRESS.com
That is not the truth.
“We said this for him to save face,” said the first lender, explaining that Trump will only get an interest after all creditors are paid in full, which is highly unlikely.
A Citicorp representative is president of Plaza Operating Trust, sources said, and is Trump’s boss.
“Donald wants an allowance at the Oak Plaza Room restaurant so he can still have a table,” said the first lender.
Lenders currently won’t allow Trump to owe more than $155 million in total, limiting the money he can borrow against his personal Plaza Hotel guarantee and DIP loan, the first lender said.
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Trump continues to live by his own rules.
“He invited me to his 1993 wedding to Marla Maples at The Plaza,” says the second lender.
“At the time of the wedding, Plaza had a real problem.”
There is the issue of how much money Trump needs each month to operate.
“I said to my boss. We’re going to sue this damn man, how can we go to his wedding?
“I got an invitation but didn’t go. Impossible.”
Some lenders instead go and enjoy the shine.
Marla wore a $2 million tiara with 325 diamonds.
The Donald reportedly served $60,000 worth of caviar, and had a six-foot vanilla wedding cake.
The lender did not sue Trump but sold his property.
Citicorp sold Trump’s Princess yacht in 1991 to Saudi Prince Alwaleed bin Talal al Saud, one of Citicorp’s largest shareholders, for about $20 million, resulting in a loss of about $10 million for Trump.
Trump had bought the yacht in 1988 from Adnan Khashoggi, the uncle of the late Washington Post reporter Jamal Khashoggi.
The sale to Alwaleed is Trump’s first known deal with the Saudis.
Prince Alwaleed teamed up with the Singapore-based CDL Hotels chain in 1995 also bought the Plaza Hotel in exchange for paying off his loan and giving the lender a slight upside.
Chemical Bank in 1992 took over Trump’s Regency Hotel.
Chase assumed mortgages for commercial and retail space in Trump Tower, and Trump’s West Side train station as collateral.
USAir in 1991 agreed to take control of the Trump Shuttle airline.
Vornado Steven Ross in 1995 bought Trump’s shares in the Alexander retail chain.
Separately, bondholders in the Carl Icahn-led Trump Taj Mahal in 1991 agreed to a pre-packaged bankruptcy in which they controlled the casino giant.
Banking expert Michael McCarty said during Trump’s fraud trial that Trump earned $168 million in benefits from getting better interest rates when he personally guaranteed his loans in more recent deals including buying the Old Post Office in Washington DC, the Doral Golf Resort & Spa, and 40 Wall Street.
Whether Trump can slip out of this personal bond without losing his license remains to be seen, but he suffered a blow on Wednesday when a judge ruled he would not be allowed to testify in court in his defense during closing arguments.
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