TOClub in Default, Talks Forbearance

Newland International Properties, the owner of troubled Trump Ocean Club Hotel & Tower (TOClub), on Tuesday missed its first $31.4m capital payment due on $220m in 9.5% 2014 bonds and is now asking debtholders to sign a forbearance to stop all debt outstanding from becoming due immediately. “The company will miss the principal payment today,” John McCormack, managing partner for the Gapstone Group, an advisor to Newland, tells LatinFinance. Newland and Gapstone are asking bondholders to sign a forbearance that would allow the company to finish construction on TOClub and prevent the debt acceleration. McCormack says that no deal has been struck yet to restructure the debt outstanding and that it still remains to be seen if Trump will accept a reduction of its licensing fees to make TOClub apartments more attractive for buyers. Under the terms of bond indenture, an acceleration of the debt would subordinate Trump’s $38.9m fee to other payments, but it would also block Newland from using project proceeds to fund working capital to finish the project. TOClub bonds are rarely traded but they were being quoted at 62.50 or at 29.115% on a yield basis, after recently falling to 55.00. The Panama based luxury project has suffered from a strain on cash flows after cost overruns and buyers showed an unwillingness to close on apartment purchases.