Trump can’t secure $454 million appeal bond in New York fraud case, his lawyers say

Donald Trump cannot obtain a bond to secure the $454 million civil business fraud judgment against him as he pursues an appeal of the case, his attorneys said in a New York court filing Monday.

Attorneys for Trump and his co-defendants in the fraud case argued that it was “impossible” for them to secure a complete appeal bond, which would “effectively” require “cash reserves approaching $1 billion.”

“Defendants’ ongoing diligent efforts have proven that a bond in the judgment’s full amount is ‘a practical impossibility,'” the lawyers wrote, quoting an affidavit in the filing with the Appellate Division of Manhattan Supreme Court.

They said they have approached roughly 30 surety companies through four separate brokers, and that they have spent “countless hours negotiating with one of the largest insurance companies in the world.”

The lawyers said that if the appellate division considers denying the requested stay of the judgment, it should schedule oral arguments on the issue. And if the division declines to grant the stay, the lawyers asked that it allow them to file an appeal with the Court of Appeals, the highest state court in New York.

Manhattan Supreme Court Judge Arthur Engoron in February ordered Trump and his co-defendants to pay a total $464 million in damages and interest for violating a New York anti-fraud statute. Of that total, Trump was ordered to pay $454 million. Trump’s post-judgment interest continues to accrue at a rate of nearly $112,000 a day.

The case brought by New York Attorney General Letitia James accused Trump, his two adult sons, his company and its top executives of falsely inflating Trump’s asset values for years to boost his net worth and get financial perks.

Trump in a deposition last year claimed to have “substantially in excess of $400 million in cash.” But Monday’s filing nevertheless asserted that obtaining a bond for the full $464 million judgment is unattainable.

The nearly 5,000-page filing includes an affidavit echoing that view from Gary Giulietti, president of the Northeast division of the Lockton Companies, which he describes as the largest privately held insurance brokerage firm in the world.

Giulietti, who was hired to help the defendants obtain a bond, wrote, “Despite scouring the market, we have been unsuccessful in our effort … for the simple reason that obtaining an appeal bond for $464 million is a practical impossibility under the circumstances presented.”

Only a handful of bond surety companies are approved by the U.S. Treasury Department to do underwrite a bond that large, and many of those will only issue a single bond up to $100 million, Giuletti wrote.

He added that none of those entities will take illiquid assets, such as real estate, as collateral.

“Simply put, a bond of this size is rarely, if ever, seen,” Giulietti wrote. “In the unusual circumstance that a bond of this size is issued, it is provided to the largest public companies in the world, not to individuals or privately held businesses.”

It would be unattainable for any private company, unless they have around $1 billion in cash or cash equivalents to put up as collateral while still being able to satisfy their other business obligations, Giulietti added.

“While it is my understanding that the Trump Organization is in a strong liquidity position, it does not have $1 billion in cash or cash equivalents,” he wrote.

Trump’s attorneys also noted in the filing that bond issuers will often demand collateral totaling 120% of the judgment, which equates to over $557 million.

Those issuers are also likely to demand a two-year advance on a 2% annual bond premium, which would require the defendants to pay over $18 million up front, the defense attorneys said.

The defendants had previously offered to post a $100 million bond, less than one-fourth the total judgment, in order to pause James from collecting the penalties during the appeal process.

Appeals court Judge Anil Singh rejected that proposal, but allowed the defendants to continue doing business in New York and lifted Engoron’s three-year ban on Trump seeking loans in New York. Singh’s order is temporarily in effect before a full appeals court panel hears the motion for a stay.

Trump’s attorney Alina Habba did not immediately respond to CNBC’s request for comment on the filing.

Trump earlier this month obtained a $91.6 million bond from the Chubb insurance company to secure a civil defamation judgment against him in favor of the writer E. Jean Carroll while he appeals that judgment.

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