Alexandria Ocasio-Cortez Follies

Quote: Mission146

The fact of the matter is that the later building projects were financed largely with high-interest loans and Junk grade bonds...also high interest. The later casinos would open essentially needing a miracle just to keep up with the interest obligations, let alone ever being able to pay off the loans/bonds upon maturity. It's the same thing that happened to Revel, you needed to pull numbers that had never been seen in the jurisdiction, numbers never before seen in the jurisdiction either did not happen...or did not happen enough.

You are kind of throwing around the term "junk bonds." They were nothing of the sort. Interest rates were still high in the 1980s. Said rates fell thru and after the 80s but by today's standards they were out of sight. If the bonds were "junk" they would not have gotten sold. A "junk bond" is a bond that has fallen below investment grade.

What happened was we had a 1991 recession that dried up credit. Credit is the lifeblood of business. Take in lost travel because of the Gulf War and following recession along with it harder to refinance shorter term debt and all of the sudden you have a Thisroblem. Chrysler had similar problems at the time, shutting down production totally for a period of time, then the first time since WWII that had to happen.

I find it laughable when people decry that bonds were issued and loans taken out. Those things are just normal parts of business.

Ben Siegel built a fancy casino with borrowed money and had it nearly go under. Allen Glick borrowed tens of millions to buy his casinos. You quite simply must borrow money in the real estate business.

Quote: AZDuffman

You are kind of throwing around the term "junk bonds." They were nothing of the sort. Interest rates were still high in the 1980s. Said rates fell thru and after the 80s but by today's standards they were out of sight. If the bonds were "junk" they would not have gotten sold. A "junk bond" is a bond that has fallen below investment grade.

What happened was we had a 1991 recession that dried up credit. Credit is the lifeblood of business. Take in lost travel because of the Gulf War and following recession along with it harder to refinance shorter term debt and all of the sudden you have a Thisroblem. Chrysler had similar problems at the time, shutting down production totally for a period of time, then the first time since WWII that had to happen.

I find it laughable when people decry that bonds were issued and loans taken out. Those things are just normal parts of business.

Ben Siegel built a fancy casino with borrowed money and had it nearly go under. Allen Glick borrowed tens of millions to buy his casinos. You quite simply must borrow money in the real estate business.

I'm not throwing anything around. I put a fairly substantial amount of research into exactly this subject in writing this article:

https://wizardofvegas.com/articles/people-in-gambling-donald-trump/

You can read virtually any source on the subject and you will come to know they were junk bonds.

And, "Junk bond," obviously has a negative connotation with people owing to the fact that it contains the word, "Junk," but that's totally meaningless from an investment standpoint. From an investment standpoint, it just means a high-yield (interest) bond that comes with a substantial risk of default. It's no different than people with a poor credit history getting offered a credit card with an interest rate in the High-20's.

And, Trump certainly had other money, investments or properties that he could have used as collateral....although it might have taken some finagling. He didn't do that and essentially runs all of these real estate developments (at least, to start) essentially as their own companies.

Anyway, I know what a, "Junk Bond," is and that's what every source calls these bonds. Keep in mind, the properties were not entirely financed by junk bonds, but that was some of the financing.

Biased media sources? Here's a report from 1993 that calls them junk bonds:

https://www.independent.co.uk/news/business/trump-returns-with-new-junk-bond-offer-dollars-375m-launch-a-year-after-bankruptcy-1491802.html

Which was a year after the first AC company of his to file bankruptcy got out. Long before any of this so-called, "Out of state competition."

Anyway, I'm not decrying anything and literally called it normal business. Junk bonds are normal business. I certainly did not create the term.

I also mentioned Revel, who basically opened its doors in an even more hopeless financial situation than any of Trump's properties could have ever hoped to start. If you want to talk about a failure, that's where I would look.

So, I'm not saying anything negative about Trump. I'm simply offering comment as to what actually happened, at least, according to my research.

And, all the credit in the world to Trump for overseeing the construction of huge and amazing casinos and having a grand vision. Unlike so many people, he would see those visions brought to life.

That's another thing I should mention. When you emerge from out-of-court debt restructuring (if any), mediation (if any) or bankruptcy restructuring, then what often happens is that the bondholders will have the debt reduced, but then will also own a stake in the company when it comes out of restructuring. There's nothing unusual about any of this stuff, nor is there anything untowardly about any of it.

Essentially, all these possibilities get priced into the interest that the bond yields, so are things that you would consider before buying the bonds, if you're a savvy investor.

Quote: Mission146

I'm not throwing anything around. I put a fairly substantial amount of research into exactly this subject in writing this article:

https://wizardofvegas.com/articles/people-in-gambling-donald-trump/

You can read virtually any source on the subject and you will come to know they were junk bonds.

And, "Junk bond," obviously has a negative connotation with people owing to the fact that it contains the word, "Junk," but that's totally meaningless from an investment standpoint. From an investment standpoint, it just means a high-yield (interest) bond that comes with a substantial risk of default. It's no different than people with a poor credit history getting offered a credit card with an interest rate in the High-20's.

And, Trump certainly had other money, investments or properties that he could have used as collateral....although it might have taken some finagling. He didn't do that and essentially runs all of these real estate developments (at least, to start) essentially as their own companies.

<snipped to save space>

A "junk bond" is a bond rates below Baa3/BBB. It does not have to do with the interest rate alone, although a risk premium will come with a low rating. It would be very hard to get an issue like this underwritten and then sold. The only source I will believe here is a rating at issue. News sources throw around terms like "junk bonds" to fit the story.

As to other properties to use as collateral, that is a very, very bad business move. That is how you lose your entire empire. KKR, the famous LBO firm, makes all of its companies survive on their own. if you do not do this you end up selling off the good businesses to support the bad businesses, a recipe to lose it all. FWIW, that is why Eastern Airlines died. They sold the best part to Trump and kept the dogs.

Quote: AZDuffman

A "junk bond" is a bond rates below Baa3/BBB. It does not have to do with the interest rate alone, although a risk premium will come with a low rating. It would be very hard to get an issue like this underwritten and then sold. The only source I will believe here is a rating at issue. News sources throw around terms like "junk bonds" to fit the story.

As to other properties to use as collateral, that is a very, very bad business move. That is how you lose your entire empire. KKR, the famous LBO firm, makes all of its companies survive on their own. if you do not do this you end up selling off the good businesses to support the bad businesses, a recipe to lose it all. FWIW, that is why Eastern Airlines died. They sold the best part to Trump and kept the dogs.

I can't emphasize enough that I know what a junk bond is. Also, it doesn't become a Junk Bond because of the interest yield, it has that sort of interest yield because it is a junk bond. One of the main indicators of whether or not something is a junk bond is probability of default...which many of these Atlantic City related bonds had in spades.

I mean, he did indeed default on the bonds. Hence, bankruptcy and restructuring.


Ratings:

https://www.upi.com/Archives/1990/06/15/Moodys-lowers-Trump-bonds-rating/2271645422400/

Court document and quote:

https://law.justia.com/cases/federal/appellate-courts/F3/7/357/479361/

Quote:

In November, 1988 the Trump defendants offered to the public $675 million in first mortgage investment bonds (the "bonds") with Merrill Lynch acting as the sole underwriter. The interest rate on the bonds was 14%, a high rate in comparison to the 9% yield offered on quality corporate bonds at the time. The Trump defendants issued the bonds to raise capital to: (1) purchase the Taj Mahal, a partially-completed casino/hotel located on the boardwalk, from Resorts International, Inc. (which had already invested substantial amounts in its construction); (2) complete construction of the Taj Mahal; and (3) open the Taj Mahal for business.

Moddy's rated the 1988 Trump Taj Mahal bonds Speculative-Grade

https://www.nytimes.com/1988/11/09/business/finance-new-issues-trump-taj-mahal-funding-in-mortgage-bond-offering.html

Which is less than investment-grade bonds...and these were before any of the companies had filed bankruptcy. In fact, "Speculative grade," is basically just a more polite sounding term for junk bonds.

Again, this was prior to any bankruptcies or restructuring.

Here's a Chicago Tribune article from 1988 specifically calling the bonds below investment grade:

https://www.chicagotribune.com/news/ct-xpm-1988-08-18-8801230773-story.html

What other evidence would you like? Do I personally need to get ahold of Donald Trump and have him sit down for a cup of tea with us so you can hear it from his mouth that they were junk bonds? I'm concerned, from your posts on this matter, that even that would not be satisfactory.

I don't even consider this a bad thing. I don't know why you're so defensive on this matter. He financed his casinos with junk bonds.

Big deal.

He was taking a chance on building something massive in an unproven market. The revenues were not a known factor because he was trying something ona. scale that had never been done before there. It's basically the same thing the Revel tried to do...but the Revel was much worse because at least Trump arguably had a market that, you know, theoretically exists.

My main point is there is nothing, "Scammy," or, "Con man," about it. It's also not hard to get bonds sold. There are literally markets built around selling less than investment-grade bonds.

I also know that when it comes to the last paragraph. I'm saying he theoretically could have. I agree it's much better to protect your other properties by running all as separate entities...unless you're in a ridiculously stable broader industry. REITs are created with this exact concept in mind, technically separate Incs., but effectively the same company and the REITs protect the real property.

Quote: UPI

Moody's lowered its rating on the first mortgage bonds, due 1998, of Trump Taj Mahal Funding Inc. to CAA from B3, and the rating on the first mortgage bonds, due 1998, on Trump Plaza Funding Inc. to B2 from B1.

This indicates they were lowered from investment grade to junk, indicating not junk when issued.

Quote: AZDuffman

This indicates they were lowered from investment grade to junk, indicating not junk when issued.

The 1988 ones were rated, "Speculative grade," when first introduced. That means literally the same thing as Junk Bond, just the former is a more polite-sounding term.

Anything under Baa is considered speculative grade.

Quote: AZDuffman

[

The average millionaire will file for bankruptcy an average 3.5 times in their lifetime.

The average person thinks bankruptcy
is a disgrace to be avoided at all costs.
When actually it's a valuable tool
invented by wealthy lawyers so they
could get even wealthier. Most people
cannot afford bankruptcy. Millionaires
and billionaires can afford many and use
it like like the tool it was invented to be.

I know a guy who's done it at least
5 times and is better off every time
he does it. He's richer now than he's
ever been.

Quote: Evenbob

Quote: AZDuffman

[

The average millionaire will file for bankruptcy an average 3.5 times in their lifetime.

The average person thinks bankruptcy
is a disgrace to be avoided at all costs.
When actually it's a valuable tool
invented by wealthy lawyers so they
could get even wealthier. Most people
cannot afford bankruptcy. Millionaires
and billionaires can afford many and use
it like like the tool it was invented to be.

I know a guy who's done it at least
5 times and is better off every time
he does it. He's richer now than he's
ever been.

I don't know if you're referring strictly to business bankruptcy or also talking about personal. I'm sure there are factors that might cause the price to vary, but from personal experience, I know a relatively uncomplicated personal bankruptcy is hardly prohibitively expensive.

Quote: Evenbob

Quote: AZDuffman

[

The average millionaire will file for bankruptcy an average 3.5 times in their lifetime.

The average person thinks bankruptcy
is a disgrace to be avoided at all costs.
When actually it's a valuable tool
invented by wealthy lawyers so they
could get even wealthier. Most people
cannot afford bankruptcy. Millionaires
and billionaires can afford many and use
it like like the tool it was invented to be.

I know a guy who's done it at least
5 times and is better off every time
he does it. He's richer now than he's
ever been.

It was invented to get rid of debtor's prisons and to keep large amounts of assets from being tied up. Robert Morris was one of the biggest landowners in the USA until financial panic of 1797. In 1800, the first bankruptcy law was passed to give an orderly process.

Bankruptcy allows the good parts of a business to survive and the bad parts to be disposed of. It is not a "free" thing, but imagine if GM had to sell of everything instead of being able to dump just the bad parts in 2009.