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Trump's Personal Guaranties and Liquidity

posted by Adam Levitin

The revelations about Donald Trump's taxes might hold in them an explanation for why he didn't divest from his businesses when he became President, despite the obvious political problems that was going to create:  he couldn't afford divesting.  

Trump seems to have personally guarantied hundreds of millions of dollars of corporate borrowing. That's not uncommon for someone in his position, but I would imagine that at least some of those personal guaranties have key man provisions that require him to remain involved with the business. If he doesn't, the loan (and guaranty) might be in default and callable. And there are surely cross-default clauses in some of the borrowings, so it wouldn't be just one loan that could come due, but a bunch of them. It's pretty clear that in 2016 Trump didn't have the liquidity (and perhaps not even the assets) to deal with that sort of situation. 

Now let's be clear. There might have been other motivations for Trump to retain control over his businesses. But to that list, we should add the possibility that he had boxed himself in and couldn't divest even if he had wanted to without ending up broke. 

September 28, 2020 at 9:35 PM in Celebrity Bankruptcy

Comments

I thought you had to keep personal gtees to make the dividends tax free. A fairly common thing in real estate, or so I've been told. True?

Posted by: K2 | September 29, 2020 at 01:31 AM

Do you think his lawyer advised that the only way to deal with his federal tax debt was to become president and order the irs to settle or discharge them?

Posted by: David lander | October 05, 2020 at 08:36 PM

That's advice I've given many clients. Always works. They swear by it.

Posted by: Adam Levitin | October 05, 2020 at 08:42 PM

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