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R AISING M ONEY

They formed a joint venture in which Conseco agreed to put up the
bulk of the money over a new mortgage loan that Trump was able to
obtain.
Trump made a deal with Lehman Brothers that for a substantial fee
they would commit to fund $700 million at a low interest rate ac-
ceptable to Trump. This amount—$700 million—was almost 90 per-
cent of the purchase price—a very high loan to value ratio. Since the
loan was top heavy, Lehman required some guarantee to induce in-
stitutional investors to participate. Trump persuaded Conseco to give
the lenders the guarantee they wanted, to cover what the lenders
perceived to be excess loan proceeds. In order to achieve a low in-
terest rate, Lehman had to syndicate the loan (i.e., split the loan into
several pieces, each of which would have a different degree of risk
and a different interest rate, and would be sold to a different in-
vestor). The first mortgage loan of $500 million was layered in $100
million increments. The lender with the bottom layer would have the
highest priority of payment, but would receive the lowest rate of in-
terest. The lender with the top layer would have the lowest priority of
payment but the highest rate of interest.
For the remaining $200 million of proceeds, a secondary loan was
created that was subordinate to the primary loan of $500 million. In
a manner similar to the primary loan, the secondary was also layered
to cater to investors who had different appetites for risk and reward.
The secondary financing was coupled with the Conseco guarantee so
that it would carry a lower interest rate than one without a guaran-
tee. Conseco and Trump funded any additional funds required to pur-
chase the building as required under the joint venture agreement.
When and if additional monies were required for improvements or
other business purposes both Conseco and Trump would fund their
proportionate shares by means of interest bearing loans.
As I mentioned, the building was purchased with the intention of
transforming it into a commercial condominium and selling the units

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