Money trouble at the Trump Ocean Club. The cheap copy of the Dubai Burj al-Arab hotel that's hidden between other buildings in Punta Pacifica and which had its lobby flooded at the grand opening, has now landed in a real debt crisis! They want to do a $220 million debt bond strap-on cum swap or whatever before a payment of over forty million dollars is due half November. They don't have that forty million and now default looms! Sounds like Greece? It IS like Greece! The bonds were already seriously downgraded to somewhere like two hundred steps below investment grade, so if you actually bought them you deserve them. Single room apartments that were first offered for $350,000 now sell for little over half that amount. And buyers have trouble financing their condo (strange, huh, with a lobby that floods when it rains?) or they just walk away from their purchase, because of delays or because there's just no way they can flip these condos any more. CFO Catalina Rodriguez came up with this spin, blaming the disaster on slow banks:
“We have clients who have requested mortgages, but the banks in Panama are not disbursing the money fast enough,” Rodriguez said. “Our plan is to go to bondholders to request some special conditions or to see if they can work with us while we get the money out of the banks.”
This comes of course after previous claims that they had already sold out. All lies! And if you can't get financing after prices have already been halved then either your product seriously sucks or the banks are in trouble, or both. We think both.
And Trump himself? He won't lose a penny in this fiasco, because contrary to popular belief, he didn't invest in it but instead franchised his name. They're paying him. Maybe he even got a bonus? [Business Week]
UPDATE 17/11: And indeed, they defaulted on the $31.9 million amortization payment, but did make a $10 million interest payment - that was apparently all they could cough up. This is a project that has been hyped over and over as an example of Panama's great investment climate. They can't sell those condo's even at half the price, their bonds have less than junk status and they can't pay their debt. So typical.