Donald Trump’s Treasury Pick Flirts With Junk Bond Status

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The man Donald Trump would like to make Secretary of the Treasury is having his worst investment year since the bitterest days of the 2008 financial crisis.

Carl Icahn, who has flirted with accepting Trump’s offer before, watched his hedge fund lose 18 percent of its value last year due to a declining energy sector. That was after a 7 percent loss in 2014.

In total, the company posted $6.3 billion in cash and cash “equivalents,” including Icahn Enterprises’ $3.4 billion stake in its hedge fund, which could be liquidated if needed. The company also touted cash held by businesses it owns and operates, such as Tropicana Entertainment Inc., which runs casinos in eight states.

But the holding company’s cash dropped to $166 million, down from $1.12 billion at the end of 2014 — raising questions about its ability to repay debts and make new investments.

Icahn turned down Trump’s public proffer of the Treasury Department at his campaign launch last June, saying “I am flattered but do not get up early enough in the morning to accept this opportunity.” He later seemed to accept the job in a tweet which may have just been an attempt at humor. In statements since then, he has indicated that he would not like the job.

Trump mentioned other billionaire friends, such as private equity guru Henry Kravis, General Electric CEO Jack Welch, and investor Warren Buffett when he touted his potential roster of cabinet picks.

Just days ago, the Standard and Poor’s ratings agency said that Icahn Enterprises was on the verge of being downgraded to junk status.

The news weighed on Icahn Enterprises’ stock price, pushing it down nearly 11 percent in afternoon trading to $48.75. In the last 12 months the stock price has been cut in half mainly because its energy investments have been hit by falling commodity prices.

Icahn Enterprises has lost “at least $1.4 billion in value” since the end of September, S&P wrote in the statement, adding it thought Icahn’s hedge fund had lost money this year because of bets on energy companies including Chesapeake Energy Corp. and Cheniere Energy Inc., along with miner Freeport-McMoRan Inc., which have fallen. Chesapeake is down 56 percent this year.

“The CreditWatch listing indicates that we believe there is at least a one-in-two likelihood that we may lower the ratings within the next 90 days,” S&P said.

But Icahn is more than just a friend to Trump, he’s also an important lender to the reality show star. After providing Trump Entertainment Resorts with $82.5 billion in financing, Icahn now owns the Trump Taj Mahal as well as the Trump Plaza Hotel and Casino in Atlantic City.

It is the third time that Trump-branded casinos have gone through bankruptcy.

Eighty years old, Icahn is also turning into a key political ally. Last October, he announced the formation of a pro-Trump super PAC with a commitment of $150 million, roughly the same amount of cash that Jeb Bush set on fire while running against Trump.

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