Banks that lent $2 billion to Donald Trump may be forced to admit they may never be fully repaid even if current talks to keep the real estate and casino developer out of bankruptcy succeed, analysts said Friday.
They said banks are likely to place the loans on a "non-performing" status, forcing them to set aside reserves to cover the debt in case they are not paid back.Trump, who faces a cash shortage and looming debts, missed $73 million in bond and bank loan installments last Friday and could formally face default at midnight Tuesday if he is unable to pay off his bondholders.
Trump advisers are currently in negotiations with four main lenders - Citicorp, Bankers Trust New York Corp., Chase Manhattan Corp. and Manufacturers Hanover Corp. - on a $65 million loan to tide the developer over and help him avoid default.
But the talks have floundered because of the reluctance of foreign banks to fully back the deal.
Japanese banks are said to be balking at the terms of the deal. Bankers in Tokyo said they made sound loans to projects like the glittery Trump Tower on New York's Fifth Avenue and do not want to see their collateral cluttered up with other banks' claims.
If Trump is forced into bankruptcy, they could recover their loans by selling off Trump's assets. They feel the New York banks are trying to cover their exposure on Trump's less-profitable assets by taking liens on more healthy ones.
Banking sources said it may be premature to declare certain loans to Trump as non-performing before the negotiations are completed.
But analysts said it is still likely to happen.