What Happens If Trump Can’t Cover $454 Million Bond: QuickTake

Donald Trump owes New York $454 million after losing the state’s civil fraud suit over his asset valuations. The former president is challenging the verdict, but he still faces a March 25 deadline to post a bond covering 120% of the judgment while he appeals. In a March 18 court filing, Trump said 30 companies that arrange such bonds declined to take his real estate as collateral and he doesn’t have enough cash. The stakes are high for his business empire as he campaigns to return to the White House.

Why is Trump struggling to come up with the bond?

He’s been hit with two massive verdicts this year totaling more than $540 million — a large sum even for a billionaire. Collateral of 110% to 120% of a judgment is necessary for appeal bonds, meaning the total amount he’d need to raise is closer to $600 million. That’s likely more than Trump’s cash. Trump said in a social media post March 22 that he has almost $500 million in cash on hand, though he said he’d use a “substantial” amount of that on his campaign. The Bloomberg Billionaires Index estimates his liquid assets at about $400 million, though his exact financial status remains famously opaque.

Trump turned to Chubb Ltd.’s Federal Insurance unit to arrange a $91.6 million appeal bond after a jury ordered him to pay $83.3 million to writer E. Jean Carroll for defaming her in 2019 when he denied her sexual-assault allegation and accused her of fabricating the attack to sell a book. But the sheer size of the fraud judgment has limited Trump’s options. He said companies that arrange such bonds will only take cash, citing an industry standard meant to avoid the risks of real estate. That raises the prospect of a “fire sale” of his properties to raise enough cash for the bond if the court doesn’t step in to spare him.

Donald Trump

Photographer: Brendan McDermid/Getty Images

The appeals court could rule at any time on his request to put the verdict on hold without a bond or allow him to post a smaller bond of about $100 million.

What happens if Trump doesn’t post the bond?

New York Attorney General Letitia James, a Democrat who brought the fraud suit against Trump, is likely to take action to seize his assets. Asset seizure is a form of confiscation by authorities, used in the justice system for those who have financial obligations they don’t meet. The process wouldn’t involve law enforcement raiding buildings and putting padlocks on doors like a casino being seized for money laundering. Instead, it would start with liens being filed in county offices, perhaps in conjunction with an announcement by the attorney general.

James would then go to court for what would likely be a series of drawn-out legal battles that would focus on the judgment against Trump and his failure to pay it. Trump could seek to halt the process by arguing that he’s being subjected to unfair harm and that he’s likely to succeed in overturning the verdict. It’s far from certain that a judge would buy that argument after Trump lost a trial on the same arguments.

The seizure process could shine a light on the inner workings of the Manhattan-based Trump Organization, opening the company up to intense financial scrutiny. That’s because the seizure process will involve identifying banks and other entities that may have ownership interests or mortgages on the properties, revealing how much wealth they really represent for Trump. It’s possible that James would need to eventually sell multiple properties to attain what the state is owed. On the other hand she may not want to sell the assets right away. Doing so could fail to fetch a decent price for the state, plus there’s the risk that Trump’s appeal succeeds.

On March 6, James registered the $454 million judgment against Trump in Westchester County just outside Manhattan. That signaled that his properties in the area — Trump National Golf Club Westchester and the mostly undeveloped 212-acre Seven Springs estate — may be at risk of being seized.

Could Trump use bankruptcy to escape this?

Any debtor can use bankruptcy to attempt to shed their obligations, including judgments in legal cases. But because Trump’s judgment pertains to fraud, James could have a stronger case that a bankruptcy filing was made in bad faith to escape an obligation and not due to actual insolvency.

The optics of filing for bankruptcy during a presidential campaign could deter Trump, too. It would force a public airing of his assets and debts. Of course, Trump has used the bankruptcy laws in past decades, calling himself the “king of debt.”

Which properties would Trump be most likely to sell?

There has been no sign of Trump actively looking to sell his properties. If he does, he has options.

Trump could sell his minority stakes in two commercial office buildings — 555 California in San Francisco, and 1290 Avenue of the Americas in New York — that are majority owned by Vornado Realty Trust. Those are worth an estimated $625 million and would be among the quickest ways for him to raise the cash he needs.

Trump National Doral, a 622-acre Miami resort, is worth $305 million, according to the Billionaires Index, with $125 million in associated debt. But the hot local market and potential development opportunities at the site could make that a low estimate. The Trump Organization says it received a bid of $1.5 billion for the property last year, contingent on zoning approvals that would allow residential development at the property.

The entrance to the Trump National Doral in Doral, Florida.

Photographer: Joe Raedle/Getty Images

There’s also Mar-a-Lago, the private club and estate that Trump uses as his winter home. It has no debt and is located in Palm Beach, where the real estate market is exceptionally strong. Its value is up for debate, though: Trump allies say it’s worth more than $1 billion; the Billionaires Index pegs it at $240 million.

James has said Trump’s ownership of 40 Wall St. alone was sufficient to pay his fine, but the Billionaires Index values the property at $270 million, with $120 million of associated debt.

The value of the former president’s stake in Trump Media & Technology Group is set to increase through a public listing accomplishedvia a merger with the blank check company Digital World Acquisition Group, whose shareholders approved the deal March 22. Trump, who will own more than half of the new entity, is expected to reap $3.3 billion on paper. However, under current rules, he’d be unable to cash out for roughly six months.

Can someone throw him a financial lifeline?

Trump could accept financial aid from any number of wealthy individuals in his vast social circle, many of whom may see a benefit to helping a potential future president. Wealthy foreigners and governments spent big at Trump’s properties while he was in office, leading to allegations that Trump was using his presidency to enrich himself as others sought to curry favor.

If Trump received cash, he could use it immediately to get a bond without necessarily having to say where it came from. He would, however, likely have to list it as income on his taxes, meaning the gift could eventually become public.

Would a gift violate campaign finance rules?

Campaign finance laws expressly prohibit using campaign money for anything other than specific election efforts. Given the scrutiny over how Trump will pay these judgments, any amount of money transferred to Trump raises the risk of campaign finance violations, even if the gift isn’t made to the campaign. Only US citizens or permanent legal residents can contribute to a political campaign, meaning a handout from a foreigner for Trump’s bond could run afoul of the law. And legal donations by individuals are limited to $3,300 anyway, meaning any money offered by someone else to help pay the bond would likely exceed that rule.

Notably, Trump’s first criminal case — the so-called hush money prosecution in Manhattan set to start next month — touches on this issue. American Media Inc., publisher of the National Enquirer, entered into a non-prosecution deal with federal prosecutors and admitted to violating campaign finance laws by paying $150,000 to a former Playboy model to stay quiet about an alleged affair with Trump before the 2016 election. Prosecutors held that even though the sum wasn’t given to the campaign, the purpose was to help it.

The same argument could be made about any gift now, because arranging Trump’s appeal bond could be seen as helping his campaign by removing a massive legal and financial obstacle.

(Updates with Trump saying he has almost $500 million in cash and his potential gains from his media company going public)

--With assistance from Tom Maloney, Greg Farrell, Laura Davison and Mathieu Benhamou.

To contact the reporter on this story:
Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story:
Brian Chappatta at bchappatta1@bloomberg.net;
Angela Moon at hmoon43@bloomberg.net