NEW YORK, JUNE 18 -- As Donald J. Trump struggles to keep afloat his foundering empire of real estate, casinos and airplanes, the bank-ers who helped him build it are turning their focus to another issue -- how to carve up the spoils if he goes under.
In what could be the first milestone on the highway toward full-fledged personal financial collapse, Trump's bankers, junk bond holders and other creditors have begun a tug-of-war over who can claim Trump's assets if he cannot get fresh loans to pay his bills as they come due. As Trump struggles to postpone what many financial analysts believe will be an inevitable disintegration of his portfolio, his options have narrowed to such distasteful steps as selling a prized possession like New York's Plaza Hotel or placing one of his three Atlantic City casinos under bankruptcy protection.
The battle among Trump's creditors reflects a growing fear that Trump's assets may not be worth enough to cover his $3 billion in debts.
Such a shortfall would be particularly bad news for Trump's four principal bank lenders -- Citicorp, Bankers Trust Corp., Manufacturers Hanover Corp. and Chase Manhattan Corp. -- which together lent him about $2 billion, about $500 million of which Trump personally guaranteed, banking sources said. This could give the banks the right to go after all kinds of personal property Trump owns, including his villa in Florida and his luxury yacht, to get back their money.
"His adjusted net worth is minus several hundred million dollars, by my estimate, and he is alive only because his bankers are too red-faced to pull the plug on his life-support system," wrote Martin T. Sosnoff, chairman of Atlanta-Sosnoff Capital, a New York money-management firm, in a weekly column that he writes for the New York Post.
Trump, who never missed a chance to boast of his successes on his way up, has virtually dropped from view now that the New York tabloids are trumpeting his fall. In his only public appearance since he began marathon refinancing talks with his bankers last month, Trump on Saturday was mildly defiant in remarks at a celebration in Atlantic City to honor his 44th birthday.
"Over the years I've surprised a lot of people. The largest surprise is yet to come," Trump said. Criticizing reporters for focusing too much on negative news, he added, "Nobody wants to write the positives."
But a source familiar with Trump's financial situation offered a much more pessimistic view, saying that Trump could have trouble making debt payments later this year even if he reached a short-term agreement with his bankers this week.
"The issue is not what happens now, but what happens a month or two from now, when things are coming up on other properties," said the source, who spoke on condition of anonymity.
Trump's immediate fate now depends on whether his bankers will lend him enough fresh cash to enable him to make about $43 million in payments on his Trump Castle casino junk bonds due on June 26. That is the end of a 10-day grace period, which began when Trump defaulted on a bank loan and junk bonds issued to finance the Trump Castle.
The struggle among Trump's creditors helped cause the default because his bankers want to obtain stronger guarantees that they will eventually be repaid before they advance him money to pay the Castle bondholders.
If Trump remains cut off by his bankers at the end of the grace period, he is almost certain to have no choice except to file for bankruptcy protection for the company set up to finance the Trump Castle casino. Otherwise, bondholders could launch legal proceedings to seize the casino itself.
A bankruptcy filing would set off a lengthy legal fight, however, in which a court would oversee Trump's operation of the casino. If the casino failed to get back on its feet financially -- and there are big question marks over the long-term health of the Atlantic City gambling market -- Trump might eventually have to sell it to cover bondholders' claims.
In the best of circumstances, Trump would be able to borrow enough fresh cash to pay bills due on his debts only if he takes out fresh mortgages on the few money-making properties that he has left. They include New York's Trump Tower and Grand Hyatt hotel, and the Trump Plaza Casino in Atlantic City.
In addition, Trump is likely to have to unload some of his most highly prized properties, possibly at fire-sale prices, to raise money or cut his losses. The Plaza Hotel, which Trump has described at "the ultimate trophy," already is on the auction block.
Even if he gets less than the $440 million he has put into it, Trump would do well to sell the Plaza, because it is reportedly costing him about $20 million a year to operate. Citicorp is said to be so interested in seeing Trump unload the Plaza that it is willing to finance a sale of the hotel by lending enough money to a buyer to make the purchase, banking sources said.
Trump is already trying to sell the Trump Shuttle airline, another money-loser, which links Washington, New York and Boston. He may also sell his 76-acre lot on Manhattan's Upper West Side, where he had hoped to erect a huge development named Trump City featuring the world's tallest building.