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Medicine for the old folks in Iowa JJ Ingersoll, our head of global focus, is raging at Stella de Santos’s latest coup. Our newly hired head of regional and emerging focuses has just launched a record-breaking 1,000-year floater for debut borrower El Republico de Basket Caso. A novel marketing structure was used. The republic felt a costly roadshow process would be counter to its and investors’ interests given its lack of a credit rating or a central statistics office. So we elected to send every fund manager in Edinburgh a case of single-malt whisky with a prospectus inside. Reports coming back from our salesforce were that the woody-tasting Isle of Gaga went down very well, and that the orders were large. Macpherson at the Braveheart Pension Trust said the pricing started to look exciting on the rocks and bubbly with soda. In the face of his rival’s success, JJ fears he’s lost his touch. The yo-yo on the 85th floor has already sent Stella a soon-to-be-published memo promising her a contraband supply of elastic bands if she keeps up this level of productivity and continues to answer her phone after two rings, all of which is good for the bottom line. So as I walk in I am not surprised to see JJ in a reflective mood, rummaging through his drawers in his annual tribute to Guy Fawkes, a bin-fire. Next to the trading tickets, which effortlessly float into the licking abyss, there is a speech he wrote 25 years ago. With a glint in his eye he reminisces on how much simpler life was then. Just a matter of putting your cufflinks on in the morning and helping to finance Italian motorways. Happy days. He flaps the dog-eared speech at me. I pick up the speech which is entitled Can we ever go global again? “Gentleman,” it begins. “We stand at the cusp of a brave new world. Was it the poet James Morrison who said let us break on through to the other side before dying naked of a heroin overdose in a bath in Paris? I think it was, and I think, as he lit our fire, he related a central truth.” JJ has tears in his eyes and looks skywards as if expecting some reward from beyond for his years of service to the firm, when suddenly the phone rings. It’s an editorial assistant from the hottest new TV business show in town, NFC Squat-Box with Ralph Diddly. Can JJ appear and talk about stuff for five minutes? Whatever stuff he wants including his Basket Caso whatever it was. It’s got the street talking and the ticker-tape ticking. JJ looks in his diary and says when do they want him. In five minutes. I turn on the TV and there’s the ever-slick Ralph Diddly, doyen of the cross-border question and star-spangled friend of the yo-yo on the 85th floor. The questions are rattled off between interruptions from Diddly’s sidekick, Joe Larue, about punchy stocks vibrating along his ticker. “So JJ, what do you think of stuff happening in the Middle East and how’s that gonna impact the Dow? What’s your view on technology stocks in Kiev? What do you think of that Repsol out of Spain?” The questions go on until finally Diddly asks: “Great deal you did with Basket Caso, what’s that mean for ma and pa in Iowa?” This is JJ’s moment, and I look across the trading floor and see Stella barely able to control her emotions. “Well, Ralph, this is the type of deal where everyone’s basically a winner. In this business we like to call them rare beasts.” “Could you define a rare beast. Just for the folks at home.” “Sure. It’s basically an animal that’s not very common.” “Got ya. So you might see one in a zoo. Right? But only a very good zoo I’m sure.” “Sure Ralph. But you’d see the Basket Caso deal in a financial zoo, and if I had my way Ralph it would be just off Wall Street and Jean Paul Volcker would be the zoo-keeper and Charlie Sanford would clean up the mess the deals make.” “I bet the kids would love that zoo. But getting back to the deal. Everyone’s a winner. So that means there are little or no losers in this transaction. Is that a correct interpretation of what you said?” “Love that interpretation, Ralph.” “Thanks. But strictly speaking, is that possible? I mean, is that not like an American, a Russky and a Chinese all winning gold in the 100-metre medley swimming event always a personal favourite of mine.” “But the bond markets are a different kind of swimming pool, Ralph. That’s what the kids at home have to understand. What we did here was to basically take a borrower that had never borrowed before. The fact that it could even borrow at all was a miracle. So it was a definite winner. We priced it generously for investors and gave them an option to put the bond after 500 years. So they’re a winner too. And we as lead managers earned a few pennies as did everyone in the syndicate, all of whom were entirely satisfied with how few bonds they got.” “A put after 500 years? Could you explain what that means.” “Yes, Ralph, that basically offers the investor a lot of flexibility with what is basically an unknown credit. It’s basically a get-out option for more risk-averse investors, such as pension funds. I suspect, however, that S&M will give the republic a rating pretty soon, and I hope several upgrades on top.” “Ratings. Basically they mean how likely the borrower is to pay the money back?” “Sure Ralph. But the great thing about this deal is that investors have a chance to move all the way along the yield curve, accumulating a strong coupon flow alongside the possibility of a price boost should the republic ever manage to get a rating or we agree to trade the paper. And some pretty exciting things could happen if the existing government gets toppled in the forthcoming elections.” “Out of interest, where is the Basket Caso and what is its capital city?” “It’s located just beyond the Pampers plains, behind a group of large palm trees, and is encircled by the Locos river. Its seat of power and capital is called La Bamba.” “When are the elections?” “Hard to tell. But if they’re not overly soon the locals don’t mind.” “Why’s that?” “I’m told they’re very happy drinking their Molotov cocktails in the evenings.” “What does all this mean for the US?” “It’s good news because the government is dedicated to cultivating pharmaceutical products, and we all want to live in a healthier world.” “So ma and pa in Iowa may not die after all.” “That’s why this bond is such a rare beast.” Diddly turns to face the camera. “JJ Ingersoll, thanks. On Squat-box next week we’re gonna go looking for that zoo JJ mentioned earlier. Until then my advice to you is: close out those positions and do your financial homework.” I look across the trading floor. The yo-yo is beaming. |
