Trump lost $ 40 million on golf courses because he failed to hedge the currency

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Trump lost $ 40 million on golf courses because he failed to hedge the currency

  • Trump’s failure to secure loans for his Scottish golf courses cost him tens of millions of dollars, according to experts.
  • UK registered accounts indicate that Trump was lending from the US in British pounds sterling.
  • The British pound has depreciated significantly, adding tens of millions to its already enormous losses.
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Donald Trump’s international courses have caused huge losses and rely on loans from various Trump-owned vehicles in the United States to stay afloat.

However, the scale of Trump’s losses could be even greater than it appears at first glance, as experts point out that Trump apparently lost tens of millions more dollars because he failed to implement a very basic financial practice.

First, some context: Trump has two golf resorts in Scotland.

One is the legendary Turnberry near Glasgow, which he bought in 2014, and the other is Trump Golf Links International in Aberdeenshire.

These resorts lose millions of dollars each year, and neither have made a profit since Trump bought them.

Both resorts also rely on loans from Trump and U.S. corporations to stay afloat.

Turnberry’s parent company Golf Recreation Scotland owes Trump a total of £ 113,425,000 (around $ 160,000,000) through various U.S.-registered companies, according to UK Companies House accounts filed in December.

Trump International Golf Club Scotland Limited, which owns its Aberdeenshire golf course, owes Trump £ 44,400,049, also in the form of interest-free loans, according to Companies House accounts.

The problem is that Trump apparently created these loans in UK pounds sterling – as evidenced by the fact that they all show up as sterling loans on Companies House. The Trump organization would neither confirm nor deny this.

Unfortunately for Trump, the pound sterling has depreciated significantly against the dollar in the period since Trump started lending to his golf courses.

That means that when these loans are finally repaid to Trump in his home currency, dollars, they will be worth significantly less than when he granted them.

Trump “suffered a significant loss”

trump golf scotland


Getty

His course in Aberdeenshire began when he began operating in 2006 when £ 1 was worth almost $ 2 in debt. Now £ 1 is worth just $ 1.42 as of June 9th.

Turnberry’s parent company has also been raising large loans from U.S.-registered companies owned by Trump since purchasing the resort in 2014.

Stephen Clapham, an investment analyst and founder of the Behind the Balance Sheet financial website, who previously wrote about Trump’s business practices in Scotland, estimated in October last year that the value of these losses could be more than $ 40 million.

The pound was worth $ 1.27 when Clapham did these calculations and has since been at $ 1.42 (as of $ 9.

These losses, Clapham said, appear to have been the result of Trump’s failure to “secure” the loans he had created. In simple terms, hedging is a common business practice that offsets the risk of price movements, such as a currency depreciation, by setting the repayment rate on a loan when borrowing.

There is no evidence in the Companies House accounts that Trump’s loans were secured, although it is possible that Trump secured the loan privately in the U.S. Insider asked the Trump organization to confirm whether the loans were secured, but received no response.

“Hedging is what every company does unless there’s a specific reason you can’t – for example, invest in […] somewhere where the capital markets are not developed enough to hedge the currency, “Clapham told Insider.

The prospect that Trump lost tens of millions of pounds for failing to follow a standard business practice raises further questions about the validity of his business judgment.

“The most likely explanation is that Trump made this loan and suffered a significant loss. It’s the simplest explanation and probably the most likely,” said Clapham.

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