Banking on the Donald.

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High above the swarm of midday shoppers crowding Manhattan's Fifth Avenue, Donald Trump, surrounded by mirrored images of himself, holds forth on his current financial situation.

His office walls, all glass, reflect the thinning gray hair, wide white tie and electric blue shirt of this icon of the 1980s, who is in the midst of defending his record as a real estate developer, hotel operator, and bank debtor.

"I was a great partner," he declares, pointing a finger in the air. "The problems at the Grand Hyatt stem from horrendous management by the Hyatt chain. If I am able to turn that hotel around - which I will - the banks come out fantastic."

Mr. Trump has worked himself up over his latest nemesis: Jay Pritzker, one of the owners of the Hyatt Hotel chain and Mr. Trump's 50-50 partner in the Grand Hyatt hotel, located next to New York's Grand Central Station.

In Bankers' Hands

This 34-story building, which has been losing millions according to Mr. Trump, and desperately in need of repair according to the Hyatt organization, is one of many Trump assets now partially in the hands of his bankers.

In this case, the banks are Bankers Trust New York Corp,' and Chemical Banking Corp. Bankers Trust made an unsecured $100 million loan to Mr. Trump in 1990 and took equity in the hotel as collateral when Mr. Trump's empire began to unravel that summer.

Chemical Bank inherited a $30 million loan on the property when it merged with Manufacturer's Hanover in 1993.

Home Savings of America, which bought the Bowery Savings Bank in 1988, also inherited a hotel loan, for $45 million. But Home Savings and Equitable Life Assurance - which has a $30 million original mortgage on the Grand Hyatt - are receiving regular payments and see no need to become embroiled in the acrimonious and expensive legal battle the Grand Hyatt has spawned.

What seems surprising about Mr. Trump's situation is that no institution or partner has thrown up hands in disgust and demanded that he file for bankruptcy just so they won't have to deal with him anymore.

Keeping Clear of the Courts

But, in fact, banks went to great lengths to avoid bankruptcy with many of the mougal-style developers of the 1980s because the court process is so time-consuming and cumbersome.

From Citicorp, which led the pack with a $993 million exposure to Mr. Trump and his various affiliates, to Midlantic, with a relatively paltry $13 million casino-related loan, the position of the banks is to get some piece of collateral in exchange for leniency and let the Donald be Donald.

Nearly all of the large American banks that lent money to Mr. Trump prefer to keep him relatively unsullied in the public eye so that he can continue to pull people into his casinos and persuade them to buy his high-priced condominiums.

Says one banker close to the situation: "Every dollar of value that Donald has created since 1990 has been created for us. He will work for the banks forever. He's a marvelous employee in the casino business.

"His condominiums sell at a premium to every other apartment in New York. Donald is a marketer. He can act like a used car salesman and become very rich. He is an icon to the type of people who go to Atlantic City. We like him as an employee."

Each of the banks with the largest exposure to Mr. Trump has taken some piece of his assets, leaving just enough left over so that Mr. Trump still has a stake in using his public stature to generate wealth.

Chemical Bank, for example, now owns Trump's Regency Hotel in Atlantic. City, in exchange for $75 million of the $161 million in total debt it is owed. A Trump organization operates the property.

Chase Manhattan Bank, which originally held $295 million in Trump-related loans, holds the mortgage on the commercial and retail space in Trump Tower, a building of high-priced condominiums, retail stores, and office space on Fifth Avenue and 56th Street in New York City.

Chase also holds as collateral the old West Side rail yards, where Mr. Trump plans to build the Riverside South apartment and retail complex. To earn any profits at all on this property, the rail yards must be developed.

'Marquee Value'

At this point, Chase and the other banks holding his loans still believe that Mr. Trump's much-touted "marquee value" will fetch the highest rental and sales prices once a project gets off the ground.

The banks, however, are willing to throw good money after bad on Trump-related projects only to a point. Hence, the seemingly intractable problem of the Grand Hyatt hotel where the Pritzker-owned Hyatt organization is desperately trying to get either Mr. Trump, or Chemical and Bankers Trust, to put up the $20 million it claims is necessary for renovations.

Last summer, Mr. Trump filed federal racketeering charges against Refco Properties Inc., a Hyatt affiliate, claiming, among other things, that the company's comptroller illegally used hotel funds to lavishly renovate a condominium in Westchester, N.Y., for a girlfriend.

Tax Abatement at Issue

Whether the allegations about Hyatt's mismanagement are true is largely beside the point What is really at issue in the Grand Hyatt is the hotel's 40year tax abatement, worth some $60 million, and a restricted covenant in the partnership agreement that keeps the Hyatt chain from building or operating any other hotels in the five boroughs of New York or at at the three area airports.

Mr. Trump thinks the tax abatement and the covenant together are worth $500 million, which is the damage amount he is asking for in his racketeering suit.

Mr. Pritzker is not nearly so optimistic. He is asking for only $20 million, which is half the amount the Hyatt organization says it will cost to renovate the hotel, plus $100 million in damages. The Hyatt countersued Mr. Trump, Bankers Trust and Chemical Bank in March, contending that the transfer of Mr. Trump's equity in the Grand Hyatt to the two banks was a violation of the hotel partnership agreement.

Both the Trump case against the Hyatt and the countersuit filed by Mr. Pritzker's attorneys have yet to be decided. Observers say they should be resolved within a year.

Those familiar with the cases say that in a sense, Mr. Pritzker's argument about an improper transfer of equity to the banks has merit. But Mr. Trump may succeed in getting the Hyatt suit thrown out on technical grounds. Chemical and Bankers Trust merely have a lien on a income Mr. Trump earns on the hotel, his lawyer, Jay Goldberg, insists.

Since the Grand Hyatt is losing, not making, money, (the hotel lost about $1 million last year, according to a Hyatt spokesman), the issue is moot, according to Mr. Goldberg.

Custody Battle over Hotel

Which leaves the Hyatt organization stuck in a bad marrige to Donald Trump, undergoing painful divorce proceedings that include a messy custody battle over the hotel.

"We would love to settle if Donald were willing to pay his share' of the cost of fixing the hotel. Unfortunately, I don't think he has the money," says Richard Schulze, a senior executive with the Chicago-based Hyatt group.

"The banks haven't been willing to put up the money to fix up the hotel. And the banks and Trump are in this together.

"Trump has indicated he is willing to take $50 million to go away. But the Pritzkers will not let someone hold them up by saying, 'Pay me or else.'"

Unfortunately for the Pritzkers, Donald Trump's bankers can afford to be patient when it comes to seeing returns on Trump-related assets. They have already at least partially written off many of the Trump loans as nonperforming and are happy to let their workout groups try and get as much value out of the collateralized assets as possible without making any further sizable investments.

In the case of Citicorp, it has had to satisfy itself with 1.4 million shares of stock in Alexander's Inc. and three representatives on the board of the department store chain, which emerged last year from Chapter 11 bankruptcy.

Stock Rises

Some seven years after it gave Mr. Trump a $69 million loan to buy Alexander's stock, Citi can finally enjoy the fact that the stock it owns in lieu of loan payments has climbed from $8 to a recent $54 per share.

Citi led a $300 million mortgage for the New York Plaza Hotel and on top of that gave Mr. Trump's partnership an additional $125 million loan. Now, Citi and the other banks in the mortgage group have a 49% equity stake in the Plaza and can take pleasure in the $22 million operating profit and $5 million net the Plaza posted in 1993.

Citicorp's other big Trump-related exposure, part of a $245million loan on the Trump Shuttle, is shared with 17 other banks. The group owns the airlir, e with US Air and a source close to the situation says Citicorp, along with the other banks involved, is receiving interest payments on the shuttle mortgage.

Besides hoping for a Trump victory in the battle over the Grand Hyatt, which would mean a lucrative damage settlement for Bankers Trust, that institution is making money on a $125 million public bond offering to refinance the Trump Taj Mahal casino in Atlantic City.

Bankers Trust's BT Securities unit will earn a sizable fee as one of two lead underwriters in the offering. In addition, the bank is listed as a $10 million beneficiary if the refinancing is a success.

First Fidelity, which lent Mr. Trump $78 million to construct the Taj Mahal casino in 1989, will get $64 million back if the offering goes off.

National Westminster Bank, which made its original $55 million loan to the Taj in 1989 so the casino could be outfitted with gaming tables and slot machines, stands to make back approximately $45 million if the offering is a success.

There is not much about the Taj refinancing to give the public cause for confidence. The casino has shown losses of $71.1 million, $35.1 million, and $22.5 million, respectively, in the three years since its opening in 1990.

In 1991, the Taj went through a prepackaged bankruptcy and has emerged only to face increased competition from Nevada, growing gambling on Indian reservations, and the possibility that casinos may be built in the nearby Meadowlands and Philadelphia.

Still, Mr. Trump, his lawyers, and the banks he owes money to remain optimistic about his ability to attract customers, be they for bonds, casino stock, condominiums, or hotel rooms.

One banker points, as evidence of a Tramp comeback, to General Electric's recent decision to use Mr. Trump as part of a team that will renovate the old Gulf & Western building on Manhattan'.s Columbus Circle.

"General Electric chose him because he's good at high-end marketing," this banker points out. "He does a reasonably good job of managing a hotel. The three casinos are doing pretty well. He has successfully built some very nice product. But marketing is his forte."

That, and getting banks to lend him money with little or no security.

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