His agreements with lenders and the two casino bankruptcies in those years still left Mr. Trump personally responsible for more than $100 million in debt, and his agreements had only delayed the day of reckoning to June 30, 1995.
He dealt with that danger by first shifting much of his personal debt onto his casinos, then onto a new group:
shareholders.
Step 1 came in 1993, when his company sold more junk bonds, adding another $100 million in debt to the Trump Plaza casino. More than half of the new money went to pay off Mr. Trump’s unrelated personal loans.
Then, in June 1995, with the risk of being forced into bankruptcy just weeks away, Mr. Trump shifted ownership of the Plaza casino to a new, publicly traded company: Trump Hotels and Casino Resorts. In
the initial public offering, 10 million shares were sold at $14. At the same time, the company also sold another $155 million in junk bonds, at a 15.5 percent interest rate.
Becoming a public company burdened Mr. Trump with the responsibility of putting shareholders’ interests first. But Mr. Trump, the largest shareholder and chairman of the board, could generally meet that obligation by obtaining approval from his board of directors and disclosing financial details in securities filings. The board’s three outside members were widely seen as bowing to his wishes.
A week after the initial public offering, the new company began using some of the almost $300 million it had raised to clear Mr. Trump’s personal debts. During his financial pinch two years earlier, Chemical Bank had forced Mr. Trump to give up his ownership of the Trump Regency, a hotel next to the Trump Plaza. He held an option to buy it back for $60 million, which included debt on the hotel and $35.9 million that he personally owed the bank from his purchase of a Manhattan property. The new company exercised that option, in effect transferring Mr. Trump’s debt to its own balance sheet.
In 1996, the public company issued more stock and sold $1.1 billion in junk bonds. The money was used in part to pay off $330 million in bonds on the Plaza that had been guaranteed by a company Mr. Trump controlled, as well as almost $30 million that Mr. Trump personally owed to two banks. The company also
bought the Trump Taj Mahal and
Trump Castle — soon renamed the Trump Marina — shifting more of Mr. Trump’s debt to shareholders.