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Trump Organization Charges Magnify Risks of Debt Refinancing
TFG has a ton of debt that needs to be refinance and this indictment will make the refinancing of that debt more difficult https://www.bloomberg.com/news/articles/2021-07-01/trump-organization-charges-magnify-risks-of-debt-refinancing
Now, in the latest twist, the business and its longtime Chief Financial Officer Allen Weisselberg, 73, are facing charges relating to tax crimes. The exact charges Weisselberg is facing will be unsealed on Thursday, but are expected to involve unpaid taxes on benefits extended to him. The move by Manhattan District Attorney Cyrus Vance could have long-term repercussions on Trump’s ability to keep the business afloat and refinance debt.....
Commercial loan covenants don’t typically mention criminal charges in part because they’re such a rarity for businesses, but also because charges are just that -- charges, not convictions, according to professor Adam Levitin at Georgetown University, who specializes in bankruptcy and commercial law.
A spokesman for Deutsche Bank AG, a favored lender for the Trump Organization, declined to comment on how the charges may impact the loans they have coming due.
Even if the loan documents don’t speak directly to criminal charges, sophisticated lenders -- and their lawyers -- can find a way to push the issue. Federal courts are no stranger to lengthy, expensive fights over what gives rise to defaults under commercial lending agreements.
“Regardless of the specific provisions in loan documents, when a lender wants to cut ties with a corporation that’s in trouble -- particularly in trouble with the law -- the lender will often find a way to call a default and get out of dodge,” said David Prager, a restructuring and financial adviser at Kroll, who wasn’t speaking about the Trump situation specifically.
It may also be harder to find banks willing to refinance the debt down the road -- most banks would balk at extending a loan to a company subject to a criminal indictment.
Commercial loan covenants don’t typically mention criminal charges in part because they’re such a rarity for businesses, but also because charges are just that -- charges, not convictions, according to professor Adam Levitin at Georgetown University, who specializes in bankruptcy and commercial law.
A spokesman for Deutsche Bank AG, a favored lender for the Trump Organization, declined to comment on how the charges may impact the loans they have coming due.
Even if the loan documents don’t speak directly to criminal charges, sophisticated lenders -- and their lawyers -- can find a way to push the issue. Federal courts are no stranger to lengthy, expensive fights over what gives rise to defaults under commercial lending agreements.
“Regardless of the specific provisions in loan documents, when a lender wants to cut ties with a corporation that’s in trouble -- particularly in trouble with the law -- the lender will often find a way to call a default and get out of dodge,” said David Prager, a restructuring and financial adviser at Kroll, who wasn’t speaking about the Trump situation specifically.
It may also be harder to find banks willing to refinance the debt down the road -- most banks would balk at extending a loan to a company subject to a criminal indictment.
This will be fun to watch
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