In Bankruptcy News, celebrity bankruptcies

 

Donald Trump, now president-elect Donald Trump, has filed bankruptcy four times. Or has he?

The Bankruptcies

It is true that four times since 1991 a company with Donald Trump’s name on it has filed bankruptcy. That doesn’t mean he personally has filed bankruptcy. The four bankruptcies are:

Trump Taj Mahal, 1991. Trump financed the $1 billion Atlantic City casino in 1990. By 1991 it was $3 billion in debt and Trump personally owed $900 million. The casino filed Chapter 11 in 1991 and Trump sold his stake in the casino.

Trump Plaza Hotel, 1992. Trump acquired the hotel in 1988. By 1992 it was $550 million in debt. Trump surrendered his 49% share in exchange for lenient terms from six lenders. Although he stayed on as CEO it was a figurative position for which he received no pay. This was also a Chapter 11.

Trump Hotels and Casinos Resorts, 2004. In 2004 several Trump-owned casinos were in financial difficulty. This filing in 2004 was also a Chapter 11 where Trump surrendered 20% of his 47% ownership.

Trump Entertainment Resorts, 2009. Trump Entertainment Resorts was formerly Trump Hotels and Casinos Resorts. After emerging from the 2004 bankruptcy, it was hard hit by the 2008 recession. In this Chapter 11 filing, Donald Trump gave up all but 10% ownership and resigned from any management position.

Chapter 11

Chapter 11 is a reorganization overseen by a bankruptcy court. It’s available to individuals and businesses, though it’s most often used by large businesses because of its complexity and how time consuming and expensive it is. Instead of shutting a business down, Chapter 11 allows it to continue and allows the debt to be restructured. Chapter 11 has been used by several airlines, auto manufacturers, retailers, shopping malls, and others. Often a company is in Chapter 11 bankruptcy and there is little or no change that’s apparent to anyone who isn’t an insider.

It’s not fair to put all of the blame for these filings on Donald Trump. He was acting as an investor, like Warren Buffet or Mitt Romney. ¬†Buffet has Berkshire Hathaway and Romney had Bain Capital. Both suffered serious financial loss but neither Buffet nor Romney was personally responsible. The difference is they didn’t put their names on the companies so they weren’t as publicly tied to the bankruptcies.

So, yes, our president-elect has been involved in bankruptcy four times; however, none of them was a personal bankruptcy. In a way it’s like running for political office and losing four times.

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