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The brinksmanship and surprisingly tough positions of the banks battling over the fate of Donald Trump's empire reflect lenders' new obsessions with mounting bad loans, regulatory pressure and a real estate slump that shows no sign of improving.
Four of the leading banks which are involved in the negotiations -- Citibank, Chase Manhattan Bank, First Fidelity Bancorp and Midlantic Banks Inc. -- have had their credit ratings cut recently, largely due to bad real estate loans. All of these banks, during different stages of the negotiations, issued ultimatums that could have pushed Mr. Trump and his lenders into the chaos of bankruptcy.
At the same time, three of the Japanese banks involved in one of the Chase Manhattan loan syndications have taken uncharacteristically stubborn stances that threatened to explode the $65 million bailout plan. "Usually Japanese banks are much more accommodating," says Richard X. Bove, a banking analyst with Dean Witter Reynolds Inc.
As of late last week, bankers were so desperate to protect themselves that talks were close to breaking down and the unthinkable was a distinct possibility. Mr. Trump might have to seek protection under federal bankruptcy law as early as this week.
One banker close to the negotiations blamed the impasse largely on the "every man for himself" climate that has engulfed the real estate and banking industries.
Loan workout specialists predict a breakout of similar battles among banks over other real estate problems. Salomon Brothers Inc. reported last month that "real estate's share of the increase in total (bank) loans" between 1984 and 1989 "amounted to a staggering...