$220 million in bonds issued in 2007 to build a luxury apartment building called Trump Ocean Club, owned by tycoon Donald Trump, will be restructured before the next payment of debt, which is due on November 15.
This is the date when Newland International Properties Corp. is due to repay $41.9 million, but because sales of the apartments have not been as expected, it does not have the funds to cover the payment.
For this reason, they are trying to renegotiate with the security holders, because they say that Panamanian banks are not delivering funds with the speed needed to cover bond payments.
The one bedroom apartments in Trump Ocean Club were promoted at $350,000, and are now selling at $180,000, said Kent Davis, a real estate agent in Panama. The oversupply of apartments in the country has meant that occupancy rates fell to 50% in the last half of 2010, almost 20 percentage points less than in the previous six months, when the rate stood at 69%.
An article in businessweek.com from September 21 describes how Fitch Ratings lowered the ratings of the bond issue by two levels, placing it at CC, eight levels below investment grade. Among other reasons for the decline, analysts from the firm cited the "continued uncertainty about the interest and ability of buyers to take possession of the apartments in the project".
Twenty buyers abandoned the project after making down payments, while the developer is facing obstacles to meet the originally agreed schedule, said Fitch analyst Cynthia Ortega. "
Source: BusinessWeek
More on this topic
November 2011
Holders of bonds issued by Newland International Properties Corp. are willing to become partners in the project because the developer does not have the necessary capital for the next repayment.
On November 15, Newland International Properties Corp., developer of Trump Ocean Club International Hotel & Tower, is due to pay $31 million in amortization of capital to holders of bonds issued to finance the Trump Ocean Club.
January 2009
The Fitch assessment provides a glimpse into the way the financial community is reevaluating even well performing developments in the wake of the credit crunch.
Fitch Ratings downgraded $220 million of debt on the Trump Ocean Club project in Panama City, warning price declines “could lead to higher than expected default rates for existing buyers.”
May 2012
Developer Newland International Properties announced that on May 18 it will have updates on topics of interest to bondholders.
Newland International Properties Corp., developer of Trump Ocean Club, should have made the second payment of capital on the issuance of $220 million in bonds on 15 May but did not do so.
March 2012
Investors are threatening a lawsuit against Newland Properties, the owner company, for an alleged breach of bond principal payments in November.
The owners of Hotel Trump Ocean could face legal action from Gary Lundgren, owner of 15% of the bonds that were used as financing for the construction of the building, for an alleged breach by failing to pay the agreed capital in November 2011.
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