‘A Liquidity Problem:’ Trump’s Options to Pay His $454M Penalty | WSJ

- Donald Trump faces legal sanctions worth $500 million, an amount that increases by tens of thousands every day. The ruling in his civil fraud trial in New York represents one of the biggest tests of the former president's personal wealth in decades. -He will probably have to liquidate assets, and I think that will put tremendous pressure on the Trump organization, and there is a risk that everything will start to cascade. - And he's against the clock. For now, he has until the end of March to get the funds. Otherwise, the New York Attorney General could begin seizing some of his assets.

On March 18, Trump's lawyer said he had been unable to obtain bond to guarantee payment despite negotiating with some of the world's largest charterers. So what

options

does Trump have to fund this growing bill? We asked Wall Street Journal editor Peter Grant to break down the current state of the former president's wealth. -We have analyzed his business for a long time and our best guess is that his net worth today is around $3 billion. Trump is under a lot of stress right now, but it doesn't compare to the kind of stress he faced during the recession of the early '90s.

In 1975 we had a recession, but that was a picnic compared to this. It was quite a picnic. -Just before that recession, he was much more ambitious in terms of his business goals and was buying assets left and right. - We get it out in time for you. So we will really be a good competitor and I think it will be a lot of fun. -When the recession hit in the early 1990s, he couldn't pay his debts and his empire began to crumble. He had to sell many of these assets, but even more he had to bankrupt some of his casinos in Atlantic City.

He himself was on the verge of personal bankruptcy. - Trump managed to survive the recession and then changed tactics. -He began to promote more his name, his brand. He would sell his brand to developers who would build projects. They named him after Trump, but Trump wouldn't take the risk. One of the things Trump has done to shore up his balance sheet in recent years is sell off assets. Trump has numerous assets around the world. They are mainly in the US, the ones he owns. He owns resorts, condos, hotels and has fairly large stakes in some large office buildings.

Trump's balance sheet today is much stronger than before. He has about $400 million in cash and is about $300 million deleveraged, which puts him in a more leveraged position if he needs cash fast. -Those cash reserves are now in doubt as his legal

problem

s mount. On February 16, a New York judge ordered Trump to pay $355 million in fines, plus another $100 million in interest, which will continue to increase by approximately $100,000 per day. This comes after the judge found that the former president fraudulently valued parts of his real estate empire to obtain more favorable loans. - The cases are a complete and total farce.

It is a false case. - There is a fundamental

liquidity

problem

in all this. The probability of someone having $450 million is simply not possible. -Trump appealed the ruling, but for him to move forward he must obtain financing for what could be the full amount of his fine. In late February, an appeals judge rejected an offer by Trump's lawyers to post bail of $100 million, rather than the full amount. That decision is being reviewed by a panel of appeals judges. Trump doesn't have many

options

. He could contribute the full amount in cash, but doing so is not easy. -He can't use up all his cash.

He needs a significant amount of cash to pay the bills, so he can't use the $400 million. -On the other hand, Trump could get a bond that would guarantee payment if he lost his appeal. They are typically backed by cash, investments, or other assets. -He could potentially borrow against those assets, get the cash and simply use it for the bond. - The commissions that a company could charge for the bonus could also be expensive. - It's like any other case where you're getting some kind of line of credit, right, I mean, there's going to be a negotiation about what they're going to charge you for this.

So I don't think anyone thinks this will be a cheap bonus. - Trump has until the end of March to post bail. But in a filing with the New York Court of Appeals on March 18, his attorney said he has faced insurmountable hardships and that bail for the full amount of the sentence is a practical impossibility. -We will look for mechanisms to execute the sentence in the courts and we will ask the judge to seize his assets. - The AG has no interest in keeping it secret. I think there's no question that if Trump can't secure the kind of commitment that will allow him to suspend the procedure, this is a game for her. -Trump's lawyers have acknowledged that he lacks

liquidity

to cover the sentence.

If the court does not intervene, they said he could be forced to part with his prized real estate in a liquidation sale. -He has three ways to settle the sentence without selling assets. One would be through available cash. Two would borrow against assets and three would borrow money from friends. The worst case scenario would be that he starts selling assets. He would have to sell them quickly. Buyers would have the potential to take advantage of the situation and he would not get the kind of prices he expected. So that would certainly be a bad scenario for him. - Although some of these properties can be considered iconic properties, they can be worth a lot of money, there are not many people who are willing to spend that amount of money. -A Trump spokesman did not respond to questions about how he plans to finance the sentence.

His attorney said in a March 18 court filing that obtaining cash through a liquidation sale of his real estate would result in unrecoverable losses. Trump cleared a financial hurdle for a separate case on March 8 when he obtained bail of nearly $92 million to secure a defamation judgment he owes to writer E. Jean Carroll. Meanwhile, Trump's legal team has focused on his appeal efforts. These procedures may take a year or more. - He fears that he will win the appeal. And in this case, let's assume that winning means the entire conviction is overturned, then none of this matters. The only thing you would really be out at this point, besides legal fees, would be the cost of bail.

The other part you should always remember is that these numbers will never go down. They are going up and up and they will continue to go up until the appeal is exhausted. So assuming Donald Trump doesn't win on appeal, the number we see at the end of this will be significantly higher than the number we see now. And again, we will be back here where we are today.