« J. Screwed - A Paper | Main | Argentina-Inspired Reforms to Sovereign Debt Contract Terms (Yes, Again) »

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. 

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?

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?

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

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF