Trump Trips Up

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Financial wizards usually credited with ample common sense bought it all. Whatever Donald wanted, Donald got. Citibank loaned him $1.1 billion; Bank of America some $400 million; Bankers Trust about $164 million, much of it undersecured. Says a knowledgeable source close to Trump's bankers: "They ought to be shot. They didn't ask questions."

Like most ambitious developers, Trump often faced bigger loan payments than he could hope to come up with. But leverage is one thing, recklessness something else. As the loans flooded in, Trump the builder became Trump the financial playboy. Says a former top aide: "He overpaid for almost everything -- the Shuttle, the Taj, the Castle. But I'll say this for him, he fleeced the banks. He got them into a terrible position on lender liability."

With the economy in the doldrums and real estate prices depressed, Trump has been scraping desperately for more than a year to meet his interest payments. His bankers bailed him out last summer, realizing with a chill how badly they had been taken and how thoroughly mired they were in the mess. He was carrying a $300 million mortgage on the Plaza, $120 million on the Grand Hyatt, $75 million on Trump Tower. In December his father Fred, a builder in Queens, N.Y., had to lend him $3.5 million to pay his bills. Appropriately enough, Fred did so by purchasing that amount in gambling chips from one of his son's casinos. Even as Trump's fortunes continued to decline, though, the bankers tried to look the other way, loath to tip him into bankruptcy by cracking down.

Now they are facing facts. What they may not have anticipated is how expensive it will be to get out from under Trump's operations. Brinkmanship is the stuff that gamblers are made of, after all, and casino magnate Trump cut his teeth at the edge-of-the-cliff school of negotiations. Don't count him out yet. While he will own less at the end of these negotiations, he will also owe less, and the effect on his net worth remains to be seen. After filling an inside straight in the first round of talks, he's already halfway out of the hole.

CHART: NOT AVAILABLE

CREDIT: NO CREDIT

CAPTION: WHAT'S AT STAKE

RESULT

By giving up the Trump Shuttle, his yacht, The Trump Princess, and other properties, the developer could keep such prizes as the Plaza Hotel, Trump Tower and his three Atlantic City casinos while slashing his debt.