Liquidity moves markets!Follow the money. Find the profits!
A moderator pitted the GOP candidates against each other when he asked who, between the two of them, would be better at job creation?
“Hewlett Packard is a disaster – they continue to be a disaster,” Trump pointed out. “She can’t run any of my companies, I’ll tell you that.”
Fiorina retorted, “I find it quite rich that you would talk about this. You ran up mountains of debt at your casinos, and you were forced to file for bankruptcy a record four times. Why should we trust you to manage the finances of this nation any differently than the way you’ve handled your casinos?”
There’s something to be said for the way Carly Fiorina stood her ground all night againstDonald Trump – arguably, she’s the only GOP candidate to have successfully done so in the 2016 presidential race to date.
But Fiorina’s dig about Trump’s “mountains of debt in A.C.” isn’t really as damning as she’d like it to be…
Take a look at the truth about Trump’s bankruptcy – it’s likely to come up again as he and Fiorina continue to campaign…
Carly Fiorina vs. Trump: The Truth on His “Mountain of Debt”
Bankruptcy is a tool used frequently in U.S. business. It encourages risk-taking, helps the economy adapt to changing trends, and protects shareholders.
Here’s how it works…
Put simply, bankruptcy allows debtors relief from their debt when they cannot pay it back. Through bankruptcy, a debtor can get a “financial fresh start.”
However, there are six different types of bankruptcy under the Bankruptcy Code (the federal laws of U.S. bankruptcy): Chapters 7, 9, 11, 12, 13, and 15. These chapters mainly differ in terms of who the debtor is. For example, farmers and fisherman can file for debt relief under Chapter 12 bankruptcy. Municipalities can file for Chapter 9 bankruptcy.
When it comes to the issue of Donald Trump’s bankruptcies, we are only concerned with Chapters 7 and 11.
That’s because a Chapter 7 filing is indicative of poor financial management skills on behalf of the debtor – a red flag for voters evaluating a presidential candidate. But a Chapter 11 filing doesn’t necessarily indicate poor management. In fact, it can be seen as a tool that improves a company’s value for investors.
Here’s the difference:
- Chapter 7 bankruptcy: Allows an individual to be freed of most debt in exchange for a ruined lined of credit for 10 years.
- Chapter 11 bankruptcy: Allows a corporation to stay in business while it restructures its business and attempts to reduce its debt.
On June 19, Trump tweeted, “I never went bankrupt.” He was being truthful. The real estate magnate has kept good order of his personal finances.
You see, all four of Donald Trump’s bankruptcies were the Chapter 11 type. Each resulted from over-leveraged casino and hotel properties in Atlantic City. [Editor’s Note: For a breakdown of each of Trump’s bankruptcies, go here…]
“I’ve cut debt – by the way, this isn’t me personally, it’s a company,” Trump clarified to Forbesin April 2011. “Basically I’ve used the laws of the country to my advantage and to other people’s advantage just as Leon Black has, Carl Icahn, Henry Kravis has, just as many, many others on top of the business world have.”
Trump emphasized that many “great entrepreneurs” have used bankruptcy to restructure debt, free up capital, and improve their businesses.
And he’s right.
Reed Smith partner Michael Venditto, who has represented clients in high-profile Chapter 11 cases (including bankrupt airline TWA), added in the same article that “to the ordinary person in the street, [four corporate bankruptcies] may seem surprising, but certainly not to me. Chapter 11 is how you reshape and restructure a company that has problems. It doesn’t indicate anything nefarious or even bad management.”
About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.
Disclaimer: © 2015 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.
The post Carly Fiorina’s “Mountain of Debt” Dig on Donald Trump Doesn’t Cut Too Deep appeared first on Money Morning. Reposted with permission.
Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.