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

Summary

Donald Trump is facing up to half a billion dollars in legal penalties, with the amount increasing 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. Trump's deadline to secure funds is late March, after which the New York Attorney General could begin seizing his assets. Despite his estimated net worth of around $3 billion, Trump's cash reserves are under threat, and he may have to resort to selling assets or borrowing against them to cover the penalties. The former President's legal team is focusing on appeal efforts, but if unsuccessful, the penalties will continue to mount.

Takeaways

• 💰 Donald Trump is facing up to half a billion dollars in legal penalties, with the amount growing significantly each day.
• ⏳ Trump has a deadline of late March to筹集资金, or the New York Attorney General may begin seizing his assets.
• 🚨 His lawyer has stated that Trump has been unable to obtain a bond, despite negotiating with major charterers.
• 🤔 Wall Street Journal editor estimates Trump's net worth at around $3 billion, with the current situation being less stressful than the early '90s recession.
• 🏦 Trump's business tactics have evolved to leverage his brand, selling it to developers for projects without bearing the risk.
• 💼 The Trump Organization has $400 million in cash and is deleveraged by about $300 million, enhancing his ability to increase leverage for quick cash.
• 📉 Trump's cash reserves are under threat due to mounting legal issues, including a $355 million penalty and $100 million in interest.
• 🔄 Trump could potentially borrow against his assets to secure a bond for his appeal, though the fees could be costly.
• 🏛️ If Trump is unable to secure financing, he may be forced to sell his real estate assets at a loss in a fire sale.
• 🎯 The worst-case scenario for Trump would involve selling assets quickly, potentially at unfavorable prices due to the urgency.
• 🚨 The total amount Trump owes could increase if his appeal is unsuccessful, as the penalties continue to grow.

Q & A

What is the current legal situation facing Donald Trump?

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. This represents one of the biggest tests of his personal wealth in decades.

What is the deadline for Trump to come up with the funds?

Trump has until late March to come up with the necessary funds. If he fails to do so, the New York Attorney General could begin to seize some of his assets.

What challenges is Trump's lawyer facing in securing a bond?

Trump's lawyer has been unable to obtain a bond to guarantee payment despite negotiating with some of the largest charterers in the world. The lawyer reported insurmountable difficulties in securing a bond in the judgment's full amount, which is considered a practical impossibility.

What was Trump's net worth before these legal troubles?

According to Wall Street Journal editor Peter Grant, Trump's net worth was roughly around $3 billion before the legal troubles began.

How did Trump survive the recession of the early '90s?

Trump managed to survive the recession by changing his tactics, starting to leverage more his name and brand. He sold his brand to developers for projects, thus bearing less risk himself.

What are Trump's options to finance the mounting legal bill?

Trump's options include using available cash, borrowing against his assets, or borrowing money from friends. However, using all his cash reserves is not feasible as he needs cash to pay bills, and borrowing could prove costly.

What is the current status of Trump's cash reserves?

Trump's cash reserves are in question due to his legal troubles. He previously had roughly $400 million of cash on his balance sheet, but this is now under threat as he faces financial penalties.

What could happen if Trump is unable to secure the bond?

If Trump is unable to secure the bond, the New York Attorney General will seek judgment enforcement mechanisms in court and may ask the judge to seize his assets, potentially leading to a fire sale of his prized real estate.

How might Trump's real estate assets be affected if he has to sell them quickly?

If Trump is forced to sell his real estate assets quickly, buyers could take advantage of the situation, and he might not get the kind of prices he would hope for, resulting in irrecoverable losses.

What is the outcome of Trump's appeal?

The outcome of Trump's appeal is uncertain. If he wins the appeal and the entire conviction is vacated, then the financial penalties would not be applicable, except for legal fees. However, if he does not win the appeal, the penalties will continue to grow until the appeal is exhausted.

How is Trump's legal team handling the situation?

Trump's legal team has been focused on appeal efforts, which could potentially last a year or more. They are also exploring options to secure financing without depleting Trump's cash reserves or selling off assets.

Outlines

00:00

🏛️ Legal Penalties and Financial Pressure on Trump

Donald Trump is facing up to half a billion dollars in legal penalties, with the amount increasing daily due to a judgment in his New York civil-fraud trial. This poses a significant challenge to his personal wealth. Trump may have to liquidate assets, putting pressure on his organization and potentially leading to a cascading effect. He is currently up against a deadline in late March to secure funds; otherwise, the New York Attorney General may begin seizing his assets. Trump's lawyer has stated difficulty in obtaining a bond to guarantee payment. Wall Street Journal editor Peter Grant estimates Trump's net worth at around $3 billion, but the former President is under considerable stress. Trump's past experiences with the recession of the 1990s are contrasted with his current situation, highlighting his change in tactics to leverage his brand rather than taking on risky projects. His current balance sheet is strong with $400 million in cash and reduced leverage, but his cash reserves are now at risk due to mounting legal troubles. A New York judge has ordered Trump to pay $355 million in penalties and an additional $100 million in interest, which continues to grow daily. Trump's options for financing this bill are limited and include using available cash, borrowing against assets, or borrowing from friends. His appeal efforts could last over a year, but regardless of the outcome, the financial burden continues to increase.

05:01

💰 Trump's Payment Options and the Threat of Asset Seizure

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 the judgment against him. Trump's lawyers admit his lack of liquidity to cover the judgment, and if the court does not intervene, he may be forced to sell his prized real estate at a loss. The options available to Trump to pay off the judgment without selling assets include using available cash, borrowing against his assets, or borrowing money from friends. A fire sale of his properties could lead to unfavorable terms and irrecoverable losses. Trump's spokesperson did not respond to questions about his financing plans. He recently cleared a financial hurdle for a separate case by securing a $92 million bond for a defamation judgment owed to writer E. Jean Carroll. The legal team continues to focus on appeal efforts, which could take a year or more. However, regardless of the appeal's outcome, the financial numbers continue to grow, and if Trump does not win the appeal, the final amount he owes will be significantly larger.

Keywords

💡Legal Penalties

Legal penalties refer to the sanctions or punishments imposed on an individual or entity as a result of violating laws or court rulings. In the context of the video, Donald Trump is facing half a billion dollars in legal penalties, which underscores the severity of his legal situation and the financial challenges he is confronting.

💡Liquidate Assets

Liquidating assets involves converting non-liquid assets such as real estate, businesses, or other holdings into cash. In the video, it is suggested that Trump may have to liquidate assets to meet the financial demands of his legal penalties, indicating the pressure on his financial resources and the potential impact on his business empire.

💡Trump Organization

The Trump Organization refers to the collection of businesses, including real estate, hotels, and resorts, owned and managed by Donald Trump and his family. It is the entity through which Trump conducts his business operations. The video highlights the risk to the Trump Organization due to the legal and financial pressures it is facing.

💡Net Worth

Net worth is the total value of an individual's or company's assets minus its liabilities. It represents the 'bottom line' or the actual equity an entity has. In the video, Trump's net worth is estimated to be around $3 billion, which is significant but also under threat due to his growing legal liabilities.

💡Recession

A recession is a period of negative growth in economic activity, typically characterized by a decline in GDP, increased unemployment, and a slowdown in business activity. The video references the recession of the early '90s, during which Trump faced significant financial challenges that nearly led to his personal bankruptcy.

💡Brand Licensing

Brand licensing is a business strategy where a company or individual allows others to use their brand name or trademarks in exchange for royalties or fees. In the video, it is mentioned that Trump changed his tactics after the recession by leveraging his brand name, which allowed him to expand his influence without taking on the same level of financial risk.

💡Balance Sheet

A balance sheet is a financial statement that presents a snapshot of a company's financial situation at a specific point in time, including its assets, liabilities, and equity. It is crucial for understanding a company's financial health. In the video, Trump's balance sheet is discussed in terms of its cash reserves and leverage, which are key factors in his ability to handle the legal penalties.

💡Liquidity Problem

A liquidity problem occurs when an individual or company does not have enough cash or liquid assets to meet their short-term financial obligations. In the context of the video, Trump's liquidity problem refers to his inability to immediately pay the legal penalties without significantly impacting his financial stability.

💡Appeal

An appeal is a legal process where a party involved in a case seeks a review of the decision made by a lower court, typically by a higher court. In the video, Trump's appeal of the ruling that imposed the legal penalties is a central point, as it could potentially alter the outcome of his financial obligations.

💡Bond

A bond, in a legal context, is a financial guarantee that ensures the payment of a financial obligation, such as a court-ordered penalty. It is often secured by cash, investments, or other assets. In the video, Trump's inability to secure a bond is a critical issue, as it could lead to the seizure of his assets by the New York Attorney General.

Highlights

Donald Trump is facing half a billion dollars in legal penalties, with the amount growing by tens of thousands every day.

The judgment in his New York civil-fraud trial represents 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 risking a cascading effect.

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

Trump's lawyer reported being unable to obtain a bond to guarantee payment despite negotiating with some of the world's largest charterers.

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

The current legal troubles are not comparable to the stress Trump faced during the recession of the early '90s.

In the early 1990s recession, Trump couldn't pay his debts, leading to the sale of assets and his casinos in Atlantic City filing for bankruptcy.

Trump survived the recession by changing tactics, leveraging his brand name and selling it to developers without taking on the risk.

Trump's balance sheet today is stronger, with roughly $400 million of cash and having deleveraged by about $300 million.

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

The judge found Trump fraudulently valued parts of his real estate empire to secure more favorable loans.

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

An appeals judge rejected Trump's lawyers' offer to post a $100 million bond rather than the full amount, a decision under review by appellate judges.

Trump's options are limited, and he may have to put up the entire amount in cash, which is not easy.

Trump could secure a bond backed by cash, investments, or other assets, but the fees for such a bond could prove costly.

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

The worst-case scenario for Trump would involve selling assets quickly, potentially at unfavorable prices.

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 focused on appeal efforts, which could last a year or more, and the financial penalties continue to grow during this period.

Transcripts

- [Narrator] Donald Trump

is facing half a billion dollars in legal penalties,

an amount that's growing by tens

of thousands every day.

The judgment in his New York civil-fraud trial represents

one of the biggest tests

of the former President's personal wealth in decades.

- He is probably gonna have to liquidate assets,

and I think it is gonna put tremendous pressure

on the Trump organization,

and there's a risk that it all begins

to cascade.

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

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

Otherwise, the New York Attorney General could begin

to seize some of his assets.

On March 18th,

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

to guarantee payment despite negotiating with some

of the largest charterers in the world.

So what options does Trump have

to finance this mounting bill?

We asked Wall Street Journal editor Peter Grant

to break down where

the former President's wealth stands today.

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

and our best guess is that his net worth today

is roughly around $3 billion.

Trump is under a lot of stress right now,

but it doesn't compare with the kind of stress

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

- In 1975, we had a recession,

but that was a picnic compared to this.

That was an absolute picnic.

- Just before that recession,

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

and he was buying assets right and left.

- We got it out on time for you folks.

So we're gonna really be a good competitor

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

- When the recession of the early 1990s hit,

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

He had to sell a lot of these assets,

but even more he had to put some

of his casinos in Atlantic City into bankruptcy.

He himself was on the brink of personal bankruptcy.

- [Narrator] Trump managed to survive the recession,

and then changed his tactics.

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

He would sell his brand to developers

who would be building projects.

They put the Trump name on it,

but Trump wouldn't have the risk.

One of the things that Trump has done

to shore up his balance sheet in recent years

is sell assets.

Trump has numerous assets throughout the world.

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

He owns resorts, condos, hotels,

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

The Trump balance sheet today

is much stronger than it used to be.

It has roughly $400 million of cash on it,

and he's deleveraged by about $300 million,

which puts him in the position

of increasing leverage if he needs fast cash.

- Those cash reserves are now in question

as his legal troubles mount.

On February 16th,

a New York judge ordered Trump

to pay $355 million in penalties,

plus another $100 million in interest, which will continue

to grow by roughly $100,000 per day.

This comes after the judge found the former President

fraudulently valued parts of his real estate empire

to secure more favorable loans.

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

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

The likelihood that somebody

has $450 million sitting around just is not possible.

- [Narrator] Trump appealed the ruling,

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

for what might be the full amount of his penalty.

In late February,

an appeals judge rejected an offer from Trump's lawyers

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

That decision is under review by a panel

of appellate judges.

Trump doesn't have too many options.

He could put up the entire amount in cash,

but doing that isn't easy.

- He can't deplete all his cash.

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

so he can't use all $400 million.

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

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

They're typically backed by cash, investments,

or other assets.

- He could potentially borrow against those assets,

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

- [Narrator] The fees a company might charge

for the bond could also prove costly.

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

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

there's gonna be a negotiation

over what they're gonna charge you for this.

So I don't think anybody thinks this

is gonna be an inexpensive bond.

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

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

his lawyer said he has faced insurmountable difficulties,

and that a bond in a judgment's full amount

is a practical impossibility.

- We will seek judgment enforcement mechanisms in court,

and we will ask the judge to seize his assets.

- The AG has no interest in keeping it quiet.

I think there is no question that if Trump is unable

to secure the kind of undertaking that will allow him

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

- [Narrator] Trump's lawyers have acknowledged

he lacks the liquidity

to cover the judgment.

If the court doesn't intervene, they said

that he might be forced to unload

his prized real estate in a fire sale.

- He has three ways

to pay off the judgment without selling assets.

One would be through the available cash.

Two would be borrowing against the assets,

and three would be borrowing money from friends.

The worst case scenario would be for him

to start selling assets.

He'd have to sell them quickly.

Buyers would have the potential

of taking advantage of the situation,

and he wouldn't get the kind of prices

that he would hope for.

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

- Even though some of these properties may be viewed

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

there aren't a lot of people who are willing

to spend that kind of money.

- [Narrator] A spokesperson for Trump

did not respond to questions

over how he plans to finance the judgment.

His lawyer said in the March 18th court filing

that obtaining cash through a fire sale

of his real estate would result in irrecoverable losses.

Trump cleared one financial hurdle

for a separate case on March 8th when he secured

a nearly $92 million bond to guarantee

a defamation judgment he owes

to writer E. Jean Carroll.

In the meantime, Trump's legal team

has been focused on its appeal efforts.

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

- Worry he'd win the appeal.

And in this instance,

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

then none of this matters.

The only thing he would actually be out at this point

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

The other piece that you always have

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

They're going up and up and up,

and they will continue to go up

until the appeal is exhausted.

So, assuming Donald Trump does not win on appeal,

the number that we're gonna see at the end

of this is gonna be significantly larger

than the number we see now.

And again, we're gonna be right back here

where we are today.