Breaking Down Trump’s Options to Pay $454M Civil-Fraud Penalty | WSJ

The Wall Street Journal
18 Mar 202407:35

Summary

TLDRDonald Trump is facing up to half a billion dollars in legal penalties, with the amount growing daily due to a civil-fraud trial judgment in New York. The financial pressure on Trump's organization is significant, and he may need to liquidate assets. As of late March, if he fails to secure the necessary funds, the New York Attorney General could begin seizing his assets. Trump's net worth is estimated at around $3 billion, but his cash reserves are under threat. He has several options to finance the penalties, including using available cash, borrowing against assets, or loans from friends. However, a fire sale of his real estate could lead to significant losses, and his ability to obtain a bond is uncertain.

Takeaways

  • πŸ“‰ Donald Trump is facing up to half a billion dollars in legal penalties, with the amount increasing significantly every day.
  • ⏳ Trump has a deadline of late March to筹集衄金, or the New York Attorney General may begin seizing his assets.
  • πŸ’Ό His lawyer has stated that Trump has been unable to obtain a bond, despite negotiating with major charterers.
  • πŸ€” Wall Street Journal editor estimates Trump's net worth at around $3 billion, but he faces considerable stress.
  • 🏦 Trump's business tactics have evolved over time, focusing more on leveraging his brand rather than taking on the risk of new projects.
  • πŸ’Έ Trump has sold assets and reduced his debt, resulting in a stronger balance sheet with $400 million in cash and $300 million less leverage.
  • πŸ“ˆ However, the $355 million penalty plus $100 million in interest, growing by $100,000 daily, puts his cash reserves at risk.
  • 🚫 Trump's appeal efforts continue, but if unsuccessful, he may have to sell his real estate at a loss.
  • 🏦 He has three potential ways to pay off the judgment: using available cash, borrowing against assets, or borrowing from friends.
  • 🌐 The final financial impact on Trump could be much larger if his appeal is not successful, as the penalties continue to accrue.

Q & A

  • What is the current legal situation facing Donald Trump in terms of financial penalties?

    -Donald Trump is facing half a billion dollars in legal penalties, which are growing by tens of thousands every day due to a judgment in his New York civil-fraud trial.

  • How might this legal situation impact Trump's personal wealth and business?

    -The legal penalties could put tremendous pressure on the Trump organization, potentially leading to a cascade effect that might force Trump to liquidate assets.

  • What is the deadline for Trump to come up with the funds to avoid asset seizure?

    -Trump has until late March to come up with the funds; otherwise, the New York Attorney General could begin to seize some of his assets.

  • What challenges has Trump's lawyer faced in securing a bond to guarantee payment?

    -Trump's lawyer has been unable to obtain a bond to guarantee payment despite negotiating with some of the largest charterers in the world, indicating insurmountable difficulties.

  • What is the estimated net worth of Donald Trump according to the Wall Street Journal editor Peter Grant?

    -Peter Grant estimates Trump's net worth to be roughly around $3 billion.

  • How did Trump survive the recession of the early 1990s and change his business tactics?

    -Trump survived the recession by selling assets and putting some of his casinos in Atlantic City into bankruptcy. He then changed tactics to leverage his brand more, selling it to developers without taking on the risk.

  • What are the Trump Organization's cash reserves and leverage position?

    -The Trump balance sheet has roughly $400 million of cash and is deleveraged by about $300 million, which allows for increased leverage if fast cash is needed.

  • What financial penalties has Trump been ordered to pay, and how do they continue to grow?

    -Trump has been ordered to pay $355 million in penalties plus another $100 million in interest, which will continue to grow by roughly $100,000 per day.

  • What are Trump's options for financing the mounting legal bill?

    -Trump's options include using available cash, borrowing against his assets, or borrowing money from friends without selling assets.

  • What is the worst-case scenario for Trump in terms of paying off the judgment?

    -The worst-case scenario would involve Trump having to sell his prized real estate in a fire sale, which could result in irrecoverable losses due to buyers potentially taking advantage of the situation.

  • How might the appeal process affect Trump's financial situation?

    -The appeal process could last a year or more. If Trump does not win the appeal, the financial penalties will continue to grow, making the final amount significantly larger than the current figure.

Outlines

00:00

πŸ’° Trump's Legal Penalties and Financial Pressures

Donald Trump faces significant legal penalties, with half a billion dollars in potential fines growing daily due to a civil-fraud trial judgment in New York. This poses a major challenge to his personal wealth. Trump may need to liquidate assets to meet these financial obligations, putting immense strain on the Trump Organization and risking a cascading effect. With a deadline in late March to secure funds, the New York Attorney General could seize assets if he fails to do so. Trump's lawyer has struggled to obtain a bond despite negotiations with major charterers. Wall Street Journal editor Peter Grant estimates Trump's net worth at around $3 billion, but the stress is unparalleled to the early '90s recession when Trump's empire nearly crumbled. Trump has since adapted by leveraging his brand rather than taking on risk himself. However, his cash reserves and balance sheet strength are now under threat as his legal issues escalate. A New York judge has ordered him to pay $355 million in penalties plus $100 million in interest, which is accruing daily. Trump's options for financing this debt are limited and could involve significant costs, including the potential need to sell assets.

05:01

πŸ›οΈ Trump's Legal Options and the Risk of Asset Sale

The New York Attorney General is prepared to move forward with legal action against Trump if he fails to secure the necessary funds to cover his judgment. Trump's lawyers admit his lack of liquidity to cover the judgment, suggesting that he may have to sell off prized real estate in a distress sale. There are three potential ways for Trump to pay off the judgment without selling assets: using available cash, borrowing against assets, or borrowing from friends. A fire sale of properties could lead to unfavorable terms and irrecoverable losses. Trump's spokesperson did not respond to queries about his financing plans. He recently cleared a financial hurdle in a separate case by securing a $92 million bond for a defamation judgment owed to E. Jean Carroll. Trump's legal team continues to focus on appeal efforts, which could last over a year. If Trump does not win the appeal, the financial burden will continue to grow, and he may face the same challenges of securing funds and potentially selling assets.

Mindmap

Keywords

πŸ’‘legal penalties

Legal penalties refer to the punitive measures imposed by a court of law on an individual or entity found guilty of a legal infraction. In the context of the video, Donald Trump is facing half a billion dollars in legal penalties, which are growing due to his involvement in a civil-fraud trial. This indicates the severity of the legal consequences he is dealing with and the financial burden he must bear.

πŸ’‘civil-fraud trial

A civil-fraud trial is a legal process in which a private party or the government sues an individual or entity for fraudulent actions that cause financial harm. In the video, Trump's New York civil-fraud trial is a significant event that is testing his personal wealth and the stability of his organization, as it has led to substantial legal penalties and potential asset seizure.

πŸ’‘liquidate assets

Liquidating assets refers to the process of converting non-liquid assets, such as real estate or businesses, into cash. In the video, it is suggested that Trump may have to liquidate assets to meet the financial demands of his legal penalties, which would put pressure on the Trump organization and potentially lead to a cascade of financial issues.

πŸ’‘Trump organization

The Trump organization refers to the collection of businesses and entities owned or controlled by Donald Trump, which includes real estate, hotels, resorts, and other ventures. In the video, the financial health of the Trump organization is under threat due to the legal penalties and the potential need to liquidate assets to cover these costs.

πŸ’‘net worth

Net worth is the value of an individual's or entity's assets minus their liabilities. It is a measure of wealth and financial stability. In the context of the video, Trump's net worth is estimated to be around $3 billion, which is relevant as he faces significant legal penalties that could impact his financial position.

πŸ’‘recession

A recession is a period of negative economic growth that lasts for at least two consecutive quarters. In the video, the recession of the early 1990s is mentioned as a time when Trump faced significant financial challenges, including the need to sell assets and the risk of personal bankruptcy.

πŸ’‘brand leverage

Brand leverage is the strategy of using a well-known brand name to add value to products or services, often without taking on the associated risks or costs. In the video, it is mentioned that Trump changed his tactics after the recession by leveraging his brand name, which allowed him to associate his name with projects without bearing the full financial risk.

πŸ’‘balance sheet

A balance sheet is a financial statement that presents a company's financial position at a specific point in time, showing its assets, liabilities, and equity. In the context of the video, Trump's balance sheet is discussed in relation to his cash reserves and debt levels, which are crucial for understanding his ability to handle the legal penalties he faces.

πŸ’‘appeal

An appeal is a legal process in which a party seeks a review of a lower court's decision by a higher court. In the video, Trump's appeal of the ruling that imposed legal penalties on him is a central point, as it could potentially relieve him of the financial burden if successful.

πŸ’‘fire sale

A fire sale refers to the sale of assets at significantly reduced prices, often due to financial distress. In the video, the possibility of Trump being forced to sell his prized real estate in a fire sale is discussed, which would indicate a dire financial situation and potential loss of valuable assets.

πŸ’‘judgment enforcement

Judgment enforcement refers to the legal process of collecting the amount awarded by a court order from a debtor who has not voluntarily paid. In the video, the New York Attorney General's interest in judgment enforcement is highlighted if Trump fails to secure the necessary financing, which could lead to the seizure of his assets.

Highlights

Donald Trump is facing up to half a billion dollars in legal penalties, which are increasing by tens of thousands daily.

The judgment in his New York civil-fraud trial is one of the biggest tests of the former President's personal wealth in decades.

Trump may have to liquidate assets, putting tremendous pressure on the Trump organization and potentially leading to a cascading effect.

He has until late March to come up with the funds, or the New York Attorney General could begin seizing some of his assets.

Trump's lawyer reported difficulty in obtaining a bond to guarantee payment despite negotiating with major charterers.

Wall Street Journal editor Peter Grant estimates Trump's net worth at around $3 billion today.

The current legal stress on Trump is not comparable to the stress he faced during the recession of the early '90s.

Trump's business tactics changed after the '90s recession, focusing on leveraging his brand name without taking on the risk.

Trump has sold assets and deleveraged his balance sheet by about $300 million, increasing his leverage for fast cash.

A New York judge ordered Trump to pay $355 million in penalties plus $100 million in interest, which grows by $100,000 per day.

Trump appealed the ruling but must secure financing for the full penalty amount for the appeal to move forward.

An appeals judge rejected Trump's offer to post a $100 million bond instead of the full penalty amount.

Trump faces difficulties in securing a bond, with his lawyer stating it's a practical impossibility.

Trump's lawyers acknowledged his lack of liquidity to cover the judgment and suggested he might have to sell real estate in a fire sale.

Trump secured a nearly $92 million bond for a separate defamation case against writer E. Jean Carroll on March 8th.

Trump's legal team is focusing on appeal efforts, which could last a year or more.

If Trump does not win the appeal, the financial penalty will continue to grow until the appeal is exhausted.

The worst-case scenario for Trump would be selling assets quickly in a fire sale, potentially at unfavorable prices.

There is a possibility that Trump could win the appeal, vacating the entire conviction and making the financial penalty irrelevant.

The numbers in the judgment will continue to increase regardless of the appeal's outcome until it is exhausted.

Transcripts

00:00

- [Narrator] Donald Trump

00:01

is facing half a billion dollars in legal penalties,

00:04

an amount that's growing by tens

00:05

of thousands every day.

00:07

The judgment in his New York civil-fraud trial represents

00:11

one of the biggest tests

00:12

of the former President's personal wealth in decades.

00:16

- He is probably gonna have to liquidate assets,

00:18

and I think it is gonna put tremendous pressure

00:21

on the Trump organization,

00:23

and there's a risk that it all begins

00:25

to cascade.

00:27

- [Narrator] And he's up against the clock.

00:28

For now, he has until late March to come up with the funds.

00:32

Otherwise, the New York Attorney General could begin

00:34

to seize some of his assets.

00:37

On March 18th,

00:38

Trump's lawyer said he has been unable to obtain a bond

00:41

to guarantee payment despite negotiating with some

00:44

of the largest charterers in the world.

00:47

So what options does Trump have

00:49

to finance this mounting bill?

00:53

We asked Wall Street Journal editor Peter Grant

00:56

to break down where

00:57

the former President's wealth stands today.

01:00

- We've looked at his business for a long time

01:03

and our best guess is that his net worth today

01:06

is roughly around $3 billion.

01:08

Trump is under a lot of stress right now,

01:10

but it doesn't compare with the kind of stress

01:12

that he's facing during the recession of the early '90s.

01:16

- In 1975, we had a recession,

01:18

but that was a picnic compared to this.

01:20

That was an absolute picnic.

01:22

- Just before that recession,

01:23

he was a lot more ambitious in terms of his business goals

01:27

and he was buying assets right and left.

01:29

- We got it out on time for you folks.

01:32

So we're gonna really be a good competitor

01:34

and I think it's gonna be a lot of fun.

01:35

- When the recession of the early 1990s hit,

01:38

he couldn't pay his debts and his empire began to crumble.

01:42

He had to sell a lot of these assets,

01:44

but even more he had to put some

01:45

of his casinos in Atlantic City into bankruptcy.

01:49

He himself was on the brink of personal bankruptcy.

01:53

- [Narrator] Trump managed to survive the recession,

01:55

and then changed his tactics.

01:58

- He started to leverage more his name, his brand.

02:01

He would sell his brand to developers

02:04

who would be building projects.

02:06

They put the Trump name on it,

02:08

but Trump wouldn't have the risk.

02:10

One of the things that Trump has done

02:13

to shore up his balance sheet in recent years

02:15

is sell assets.

02:16

Trump has numerous assets throughout the world.

02:20

They're primarily in the US, the ones he owns.

02:23

He owns resorts, condos, hotels,

02:27

and he has pretty big stakes in some big office buildings.

02:32

The Trump balance sheet today

02:34

is much stronger than it used to be.

02:36

It has roughly $400 million of cash on it,

02:39

and he's deleveraged by about $300 million,

02:42

which puts him in the position

02:44

of increasing leverage if he needs fast cash.

02:47

- Those cash reserves are now in question

02:50

as his legal troubles mount.

02:52

On February 16th,

02:54

a New York judge ordered Trump

02:55

to pay $355 million in penalties,

02:59

plus another $100 million in interest, which will continue

03:02

to grow by roughly $100,000 per day.

03:06

This comes after the judge found the former President

03:09

fraudulently valued parts of his real estate empire

03:12

to secure more favorable loans.

03:14

- The cases a complete and total sham. It's a sham case.

03:19

- There's a liquidity problem fundamental to all of this.

03:23

The likelihood that somebody

03:24

has $450 million sitting around just is not possible.

03:30

- [Narrator] Trump appealed the ruling,

03:32

but for it to move forward, he must secure the financing

03:35

for what might be the full amount of his penalty.

03:37

In late February,

03:39

an appeals judge rejected an offer from Trump's lawyers

03:42

to post a $100 million bond, rather than the full amount.

03:46

That decision is under review by a panel

03:48

of appellate judges.

03:50

Trump doesn't have too many options.

03:52

He could put up the entire amount in cash,

03:55

but doing that isn't easy.

03:57

- He can't deplete all his cash.

03:59

He needs a significant amount of cash to pay the bills,

04:01

so he can't use all $400 million.

04:05

- [Narrator] On the other hand, Trump could secure a bond

04:08

that would guarantee payment if he were to lose his appeal.

04:10

They're typically backed by cash, investments,

04:13

or other assets.

04:14

- He could potentially borrow against those assets,

04:17

come up with the cash, and just use that cash for the bond.

04:22

- [Narrator] The fees a company might charge

04:23

for the bond could also prove costly.

04:26

- It's like any other instance in which you're securing

04:30

a line of credit of sorts, right, which is,

04:32

there's gonna be a negotiation

04:34

over what they're gonna charge you for this.

04:36

So I don't think anybody thinks this

04:38

is gonna be an inexpensive bond.

04:41

- [Narrator] Trump has until late March to post a bond.

04:45

But in a filing to a New York Appeals Court on March 18th,

04:48

his lawyer said he has faced insurmountable difficulties,

04:51

and that a bond in a judgment's full amount

04:53

is a practical impossibility.

04:56

- We will seek judgment enforcement mechanisms in court,

05:01

and we will ask the judge to seize his assets.

05:04

- The AG has no interest in keeping it quiet.

05:08

I think there is no question that if Trump is unable

05:12

to secure the kind of undertaking that will allow him

05:15

to stay the proceeding, this is game on for her.

05:20

- [Narrator] Trump's lawyers have acknowledged

05:22

he lacks the liquidity

05:23

to cover the judgment.

05:24

If the court doesn't intervene, they said

05:26

that he might be forced to unload

05:28

his prized real estate in a fire sale.

05:31

- He has three ways

05:33

to pay off the judgment without selling assets.

05:37

One would be through the available cash.

05:39

Two would be borrowing against the assets,

05:42

and three would be borrowing money from friends.

05:45

The worst case scenario would be for him

05:48

to start selling assets.

05:49

He'd have to sell them quickly.

05:51

Buyers would have the potential

05:53

of taking advantage of the situation,

05:56

and he wouldn't get the kind of prices

05:58

that he would hope for.

05:59

So that would be a certainly a bad scenario for him.

06:03

- Even though some of these properties may be viewed

06:05

as iconic properties, they may be worth a lot of money,

06:08

there aren't a lot of people who are willing

06:09

to spend that kind of money.

06:12

- [Narrator] A spokesperson for Trump

06:13

did not respond to questions

06:14

over how he plans to finance the judgment.

06:17

His lawyer said in the March 18th court filing

06:19

that obtaining cash through a fire sale

06:22

of his real estate would result in irrecoverable losses.

06:26

Trump cleared one financial hurdle

06:28

for a separate case on March 8th when he secured

06:31

a nearly $92 million bond to guarantee

06:34

a defamation judgment he owes

06:36

to writer E. Jean Carroll.

06:37

In the meantime, Trump's legal team

06:39

has been focused on its appeal efforts.

06:42

It's possible those proceedings could last a year or more.

06:45

- Worry he'd win the appeal.

06:47

And in this instance,

06:48

let's assume win means the entire conviction is vacated,

06:53

then none of this matters.

06:56

The only thing he would actually be out at this point

06:58

other than legal fees, would be the cost of the bond.

07:02

The other piece that you always have

07:03

to remember is these numbers aren't ever going down.

07:06

They're going up and up and up,

07:07

and they will continue to go up

07:09

until the appeal is exhausted.

07:12

So, assuming Donald Trump does not win on appeal,

07:16

the number that we're gonna see at the end

07:18

of this is gonna be significantly larger

07:21

than the number we see now.

07:22

And again, we're gonna be right back here

07:25

where we are today.