NEW YORK CITY -- I'm writing this column in a coffee shop at the Trump Tower on Fifth Avenue. That's appropriate because the guy who built it, Donald Trump, the Comb-Over real-estate magnate, is running for president of the U.S.
His credential, he brags, is that he's very rich, richer than Republican rival Mitt Romney.
But Trump or companies bearing his name have gone bust four times. He gets prickly whenever this is brought up and here's what he said in a recent TV interview: "I've used the laws of this country to pare debt. ... We'll have the company. We'll throw it into a chapter [11]. We'll negotiate with the banks. We'll make a fantastic deal. You know, it's like on 'The Apprentice.' It's not personal. It's just business," he told ABC.
Well to me, Mr. Comb-Over, it is personal.
An investment advisor put me into $20,000 worth of Trump Entertainment bonds a few years back which yielded 8.5% debt. It was a good return, albeit a junk bond, but our reasoning was that the company had a conservative debt-equity ratio. The asset book value of $2.1 billion was based on 2005 prices and debts were $1.6 billion consisting of bonds totaling $1.16 billion and bank loans of $440 million.
The financial meltdown of 2008 created a cash crunch for Trump. In December 2008, he
and his management team stopped making payments to lenders and he was given breathing space for 60 days because Trump offered to privatize the company.
His offer to creditors was unreasonable. The value was there to pay off all creditors and have 25% left over because the assets were evaluated before the big real estate bubble. That's why the lenders and bondholders refused to be gutted.
The adverse publicity, and Trump's offer, led to a squabble, Chapter 11 bankruptcy protection and the disappearance of value.
A year later, I received a lousy $1,105.25 for my $20,000 investment with Trump Entertainment.
For me, however, it was a valuable lesson: Never, ever invest with Donald Trump because he keeps his billions and you get a tax loss.
And yet, he makes wealth creation the centerpiece of his value to the nation, the "my net worth is bigger than Mitt Romney's" argument. And his notoriety and name-recognition shows that 26% of Americans named Trump as a possible Republican candidate and only 9% named Romney.
That makes him the front-runner for the Republicans who haven't got any declared candidates yet, just weeks before the party's first all-candidates debate in New Hampshire.
Fortunately, Trump is a freak show, like gun-toting Sarah Palin, with his loopy, discredited accusation that President Obama can't be president because he was born in Africa, not Hawaii.
Or his solution to high gasoline prices, which is to tell OPEC to lower prices: "Let me tell you, it'll go down if you say it properly."
On Libya: "Either I'd go in and take the oil or I don't go in at all. Absolutely, I'd take the oil, I'd give them plenty so they can live very happily. You know, in the old days when you have a war and you win, that nation's yours."
With mass attention on him, like Palin had, I'm confident that the Republicans, and Americans, will also tell this presidential apprentice: "You're fired."
The sooner the better.
This post was originally published on the National Post.