Michael Ridpath - Free To Trade

Everyone felt this pull, myself included. I did my best to fight it. I didn't trust him. Partly it was because his small, blue piggy eyes seemed totally detached from his wide grin and bright white teeth. When he and everyone around him were smiling and laughing, those hard little eyes would be darting around, weighing up those around him, looking for opportunities to make the sale. Partly it was because I had suspected him of trying to pull one over on me once or twice. No doubt he succeeded with other clients, and no doubt they were still drawn back to doing business with him.

Behind this rush of energy came Cathy. She was tall and walked into the room with an awkward, angular grace. Her dark hair was tied tightly back behind her neck. She wore a crisp white blouse under an expensive looking blue suit, with a delicate set of small pearl earrings. She had a figure designed to wear elegant clothes, slim with sharp edges. But I couldn't help noticing her eyes; large and brown, they carefully avoided contact with anyone in the room. I could see what Rob meant. She had a mixture of untouchable beauty and vulnerability that must have been giving him all sorts of problems.

As we sat down, Cash began, 'Paul, I'd like you to meet my new colleague Cathy Lasenby. Cathy, this is Paul Murray, one of our more successful clients.' With this a broad grin in my direction. 'Rob, I believe you have met before.'

Cathy gave us both a thin smile, barely twitching the corners of her mouth. I nodded to her, and Rob smiled inanely and mumbled something incomprehensible in her direction.

'It's not many of our customers who are able to spot opportunities as good as the recent Swedish deal, and have the balls to make as much out of it as Paul here did,' Cash continued.

'Even the foolhardy get it right sometimes,' I said. 'There was that other customer, the American who bought fifty million. He must have made good money. I wonder who that was.'

'Oh that was a small savings and loan from Phoenix, Arizona,' Cathy answered. She had a clear, throaty, slightly haughty voice, betraying an expensive education. I have a weakness for voices like that, hers struck me as remarkably sexy. 'He often takes that sort of risk. Actually, he is quite good at it.'

For a moment Cash frowned in evident disapproval. Customers are not supposed to know what other customers are doing. In theory this is supposed to protect client confidentiality. In practice, I suspected that it was to prevent them ganging up on the investment bank in the middle. Cathy had shown her inexperience by breaking this rule.

She noticed Cash's disapproval and reddened. 'But I am sure you can keep that to yourself,' she added, glancing towards, but not quite at, me.

'Oh, of course,' I said.

Cash's grin returned to his lips. He cleared his throat. 'As you know, we have come here today to talk about the new high yield bond issue we are going to launch for the Tahiti Hotel. Cathy will outline the details of the deal to you. Before she starts, I just want you to know that we at Bloomfield Weiss think that this is a great deal. It's going to be oversubscribed several times. This'll be a blow-out. There's a lot of money to be made here for the smart guys who can decide fast.'

I wondered if there were ever any deals Cash sold that were not 'blow-outs'. 'Please go on,' I said.

Cathy began. 'You may be wondering what can be riskier than investing in a casino. You've heard about "the man who broke the bank at Monte Carlo". Why should you finance an operation that can be bankrupted by any lucky punter coming off the street?

'Well, when you are on the side of the house at the gaming tables, then your winnings no longer depend on luck, they depend on reliable percentages. Over the long run, the proportion of total bets placed that is won by the casino is remarkably constant. Different games have different percentages. Slot machines are a high-volume, low-margin business. The biggest profits are made from the high-rollers, the top thousand or so gamblers in the world, who bet, and lose, large amounts of money.

'So the secret to running a very profitable casino is to make sure that, when the high-rollers come to town, they spend as much time in your casino as possible. It is with this in mind that the Tahiti was conceived and built. It will be the most exciting and luxurious hotel and gaming complex in Las Vegas. The hotel has a South Sea theme with palm trees, lagoons and a specially regulated indoor climate that adds to the effect.'

She handed Rob and me a folder with glossy photographs of models of the new casino. The building did look impressive. Its two most distinctive features were a tall white tower, and a large glass atrium filled with trees and water. Rob, I noticed, scarcely looked at the folder, but kept his eyes firmly on Cathy.

'A good location is important to ensure that the casino attracts as many of the casual passers-by as possible,' she went on, handing us maps of Las Vegas. 'The Tahiti is located on the "Strip", between The Sands and Caesar's Palace. These are two of the most popular casinos in Las Vegas, and we expect that many visitors to these locations will want to step into the Tahiti to see what it is like.

'The casino has two thousand five hundred hotel rooms, including twelve luxury Imperial suites which will be made available free to the target list of the biggest high-rollers in the world. There is also parking space for four thousand cars and a one-thousand-seat showroom, where famous entertainers will perform every night. The aim of all this is not to make money, but rather to attract people to the tables.

'The whole complex will cost three hundred million dollars. It is just being completed now and is due to open at the beginning of September. I would like you to look at the financial forecasts I have here.' Cathy passed Rob and me two documents. 'As you can see, the casino's cash flow is expected to be twice as high as its interest costs in the first year. As you look further into the future, you will see that this ratio rises as the casino becomes more profitable.

'The new bonds will have a coupon of 14 per cent and a maturity of ten years. They will be secured with a first mortgage on the casino, so that if it does not make enough money to pay back debt, then you will become owners of a very attractive property.

'Any questions?' The haughtiness in Cathy's voice rose a notch as she threw this out like a challenge.

There was silence for a minute whilst I quickly looked over the numbers in front of me. The deal did look as though it might be interesting, but there was a lot more I would have to find out.

'I have to admit that I don't know very much about the casino business,' I said. 'And there is a lot more research which I will have to do. But I do have a couple of initial questions. Firstly, what happens to these wonderful forecasts if there is a recession?'

'It's well known that the industry does not suffer in a recession,' said Cathy. 'In fact, occupancy rates increased in the recession of the early eighties. The reason is that people actually like to gamble more when times are hard.' She looked at me, daring me to contradict her.

I looked steadily back at her, and didn't say anything for a moment or two. I don't like being patronised, however good-looking the patroniser may be. I wasn't going to let her put me off. 'I can see that may be true,' I said. 'But hasn't much of the development in Las Vegas in recent years been aimed at making it a destination for the family holiday?'

'Yes. In fact, in addition to attracting wealthy gamblers, the Tahiti is expected to be one of the top destinations for families in the next decade.'

'Little junior has got to learn his poker game somewhere,' said Cash with a laugh.

'I see,' I said. 'But isn't the family holiday one of the first things to be cut back in difficult times?'