The $464 million verdict against former President Donald Trump in a civil fraud lawsuit has highlighted the preference of surety underwriters for liquid assets.
Trump, in an effort to file an appeal of the judgment against him in the suit filed by New York State Attorney General Letitia James, reached out to a range of insurers asking them to issue a surety bond covering the entire amount of the award. That bond, which also would include additional costs charged by the issuer, delays payment of the judgment but is awarded to the plaintiff should the appeal fail.
However, all of the insurers who were approached declined to underwrite such a bond, according to a court filing from Trump's legal team.
What insurers are looking for in terms of collateral for a bond are liquid assets, said Julie Alleyne, general counsel for the Surety & Fidelity Association of America, a trade group for the industry.
"They want something that can be easily liquidated where ownership can be transferred and would not require the surety company to go through bankruptcy in order to execute on that asset," Alleyne said in an interview.
Hard assets not accepted
Trump offered a combination of liquid assets and his real estate holdings as collateral, according to an affidavit filed with the New York State Supreme Court Appellate Division, but the offer was rejected. Trump and his co-defendants face a March 25 deadline to either secure an appeal bond or pay the fine from the trial.
Gary Giulietti of broker Lockton Inc., who assisted Trump in the search for a bond, said in the affidavit that the limited number of insurers certified by the US Treasury Department to underwrite bonds for the amount of the judgment against Trump do not accept hard assets as collateral.
Surety insurers will typically look for an irreversible letter of credit from the individual or their banking partners, and/or cash equivalents, such as stocks or bonds, according to Alleyne.
"More than 30 surety companies" were approached through four separate brokers in search of the bond, said Alan Garten, general counsel for Trump and his co-defendants, in the affidavit. The sureties were offered a combination of cash or cash equivalents and unencumbered real estate holdings as collateral.
Garten said in the affidavit that the challenges were "not just the inability and reluctance of the vast majority of sureties to underwrite a bond for this unprecedented sum, but, even more significantly, the unwillingness of every surety bond provider approached by the defendants to accept real estate as collateral."
Currently, the commercial real estate sector in particular is experiencing difficult market conditions as CRE loan delinquencies have climbed to a new peak.
Giulietti said among the companies that do not accept hard assets are AXA XL, The Hartford Financial Services Group Inc., Nationwide Mutual Insurance Co., Sompo International Holdings Ltd., The Travelers Cos. Inc., Berkshire Hathaway Inc., CNA Financial Corp. and Liberty Mutual Holding Co. Inc., which accounts for some of the largest players in the US surety market.
Chubb Ltd., which issued a $91.6 million bond to Trump that allowed him to appeal the $83.3 million judgment awarded to writer E. Jean Carroll in his sexual abuse and defamation trial, was also asked by the Trump team to fund the bond for the fraud verdict.
Garten said Chubb was the only surety "willing to even consider accepting real estate as collateral," but ultimately declined, saying that it could not accept "real property" as collateral.
Chubb declined to comment.
New York State Judge Arthur Engoron, who presided over Trump's case, ordered the Trump Organization on March 21 to keep him updated on its effort to secure a bond before the March 25 deadline. Trump took to social media March 22, posting on his Truth Social account that he has almost $500 million in cash that he was planning to use to fund his 2024 presidential campaign.
