Donald Trump is battling the banks over a $40 million personal guarantee while his casinos head for a third bankruptcy. Déjà vu? I’m often asked “If Donald Trump is a Deal Maker (his Wealth Dynamics Profile) why is he so focused on his brand? In my mini-bio of Trump in “Your Life, Your Legacy”, I wrote that Deal Makers keep a low profile, Stars keep a high profile and Trump’s rising brand would eventually be his downfall.
Trump has made far more money from his property deals than from his brand. In the 1980s as his wealth grew with the markets, he took his eye off the ball, and ended up $3 billion in debt. In the last five years the same has happened. Last week Deutsche Bank sued Trump for $40 million he personally guaranteed as part of a $334 million unpaid debt for his new tower in Chicago. In response, Trump has pointed to a ‘force majeure’ clause in his agreement. This is a clause that covers unforeseeable events like riots or floods or ‘any other event not within the reasonable control of the borrower”. Donald’s defence: “Would you consider the biggest depression we have had in this country since 1928 to be such an event? I would.”
Trump has counter-sued Deutsche Bank for $3 billion for ‘damaging his reputation’. The chances of either his defence or counter-suit standing are slim, and Deutshe Bank is now using his 'reputation' against him. On Friday the bank responded with a summary judgement for the $40 million, quoting from Trump’s book last year “Think Big and Kick Ass in Business and in Life”. In it he said he loved “to crush the other side and take the benefits”, mocking the banks that had lost money on loans made to him and saying “I figured it was the bank’s problem, not mine.”
The winning formula of a Star is the losing formula of a Deal Maker. As creditors grow from his highly-leveraged deals (and the list is growing), how long before his deals - and brand - unravel?
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5 comments:
wow!!!!!!!!!! this is an awesome write! who would have thought that he shifting and trying to be a star is a downfall..thanks for reminding us to stay in our game Roger... :)
Cheers..
"Trump to Tramp...."
Roger, fantastic insight. I wish one of his apprentices could read these pearls of Wisdom to Donald. This could possibly put brakes on the iminent transition of Trump to Tramp
Donald has had a good run, unfortunately his ego has gotten the better of him in recent years.
Trump was a strong brand and too heavy for him to let it go.
Stick to what you're good at and don't get complacent, keep your eye on the ball.
It's amazing how we're told to learn from the mistakes of others, whilst the people we're supposed to learn from are repeating mistakes. Just like the recession/depression we've created.
Proves that we're all only human!
Do the best with what you have and keep moving forward, you know that after the rain comes the sun - and the rainbow!
Bobby :-)
Hi Roger, thanks for writing many good blogs, but I have to disagree with you on this one. $40 million personal guarantee is bad, but it's not the end of the world for Trump. When the market turns bad, most, if not all, of the developers are in trouble. But if they can hold on during this time, they will do very well again when the market change.
You are right to point out that he lost his wealth in the 80s because he took his eyes of the ball, but that really didn't have much to do with his raising profile. It had more to do with him being complacent, and the two are not neccessarily the same thing.
Trump is a deal maker, and there are occasions where he used his name as part of joint venture deal, whereby the partners put in all the money and Trump controls the deal and oversigthing the constructions and management in turn for the project to bare his name for higher perceived value.
What I am trying to say is, having a high profile and being a deal maker can sometime go well together. Not always, but it's possible. It certainly worked very well for Trump and it should continue to be that way.
Chayot
www.Learn2Earn.co.nz
Hi Chayot - Thanks for the comment. While Stars shine in their success, Deal Makers play it close to their chest. It's difficult for Trump to plead hardship in his negotiations when bankers have the image of him flying off in his helicopter after the meeting. That's why the more successful Stars become, the more removed they need to be from negotiations.
Latest from Bloomberg:
Trump Resigns Trump Entertainment as Deadline Looms
Feb. 14 (Bloomberg) -- Donald Trump resigned from the board of debt-laden Trump Entertainment Resorts Inc. as the company he founded faced a possible bankruptcy next week.
“I have nothing to do with it. I’m not in it, I’m not on the board,” Trump, who was chairman, said in a telephone interview. He said he had “no idea” whether there will be a bankruptcy filing.
Trump Entertainment faces a Feb. 17 deadline to make a $53 million bond payment, a target extended four times since the initial grace period ended Dec. 31. If an agreement can’t be reached this weekend the company may file for Chapter 11 early next week, or the bondholders may force it into involuntary bankruptcy, said a person familiar with the discussions.
More..http://www.bloomberg.com/apps/news?pid=20601103&sid=akkzsjUlFmuU&refer=us
(On this deal, Trump owns 28% of Trump Entertainment, which has fallen from $842m to $7m. So he has effectively lost both control of the company plus made a loss of $234m.
(PS. All that being said, Trump is smart enough to ensure that while his companies may go bust, he himself will still be OK. As will his helicopter...)
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