Donald Trump Blames the Recession for a Skipped Loan Payment
New York real estate developer and reality-TV star Donald Trump is hoping to persuade a court that the current recession should let him defer repayment of $334 million for a construction loan that was due November 7.
Before the sub-prime mortgage meltdown, Trump broke ground on the 92-story Trump International Hotel and Tower in Chicago. The tower, which will contain 339 hotel rooms and 485 condominiums, will be the country’s second-tallest building, after Chicago’s Sears Tower, when it’s completed next year. To finance the project, Trump secured a $640 million construction loan in 2005 from a group of lenders headed by Deutsche Bank AG. In his lawsuit filed against Deutsche Bank, Trump seeks to extend the loan indefinitely because the economic crisis is a “once-in-a-lifetime credit tsunami.”
Trump is relying on a “force majeure” clause in the loan agreement that would allow him, as the borrower, to delay completion of the skyscraper if riots, floods, strikes or “any other event or circumstance not within the reasonable control of the borrower” create obstacles. According to a New York Times story, Trump said the current economic downturn is not within his control as a borrower and that he should thus be able to defer payment of the loan until some time after the financial crisis ends.
Deutsche Bank claims Trump owes it $40 million that he personally guaranteed and is seeking to have Trump’s lawsuit dismissed.
If there’s one bottom line the sub-prime mortgage crisis has hopefully taught us, it’s that both lenders and borrowers alike must accept responsibility for their actions.
Do you think Trump’s “financial crisis” argument holds water? If so, what’s the difference between his circumstances and those of millions of squeezed homeowners who can no longer afford to pay their mortgage loans?
