Michael Ridpath - Free To Trade

'That was Cash. Funnily enough he wanted to talk about Mix N Match. Apparently the Tokyo Stock Exchange is full of the rumour that the company is about to be taken over by a major Japanese retailer.'

I interrupted. 'You can't trust Cash on something like that, can you?'

'That's right, you can't. But it's nice that Claire's rumour is corroborated. The really interesting thing is that Cash is coordinating a consortium of investors to buy up the outstanding debt of Mix N Match.'

'What's the point of that?' I asked.

'The idea is to form a Special Purpose Vehicle that owns most of the debt of Mix N Match, and then force the Japanese to pay out par on the bonds when the company is taken over.'

'I see. So who are the other investors?'

'Just one so far. But he is big. Irwin Piper.'

'But he's a crook!' I said. 'You don't want to have anything to do with him, surely.'

'He might not be whiter than white, but he is smart,' Hamilton said. 'He is putting in twenty million dollars. Cash wants twenty million from us, and he thinks he has an investor in the States he can get another twenty from.'

'So let me get this straight,' I said. 'De Jong invest twenty million in a Special Purpose Vehicle, along with forty million from Piper and this other investor. The SPV uses the sixty million dollars to buy bonds on the open market. Mix N Match gets taken over by the Japanese, who find themselves facing a powerful owner of a majority of the outstanding bonds. We can negotiate a big pay-out under the covenants of the bond indenture.'

'Exactly,' said Hamilton. 'And if the takeover doesn't happen, and the company goes into bankruptcy, then according to your analysis, we should still make a profit.'

'OK, so what next?'

'Apparently Piper has already got the documentation drawn up. He is using Denny Clark as his solicitors. He is arriving in the country tomorrow morning. We can meet him at Denny Clark's offices. You can come if you want.'

Rob was hovering, straining to hear as much of the conversation as he could. 'Can I join you?' he asked Hamilton. 'I would like to find out more about the junk bond market and you will probably need some help once Paul has finally gone.' Rob said all this without once looking at me.

Hamilton raised his eyebrows, thought for a second, and then nodded.

I went back to my desk. Karen said there was a John Smith from the agency, on hold, for me. It turned out to be Cash.

'Couldn't you think of a better name than that?' I said.

'Hey, someone's got to be called John Smith,' said Cash. 'Did he swallow it?'

'Hook, line and sinker,' I said. 'Let's just hope Piper manages to do as good a job as you.'

'Don't worry. That guy is a real pro when it comes to conning people. How do you think he made all that money in the first place?'

'You have a point there,' I admitted.

'I gotta go,' said Cash. 'I've got a deal to sell to a certain Arizona savings and loan.'

Hamilton, Rob and I walked into Denny's office. Four people sat around one end of the long conference table-Denny, Irwin Piper, Cash and Felicity. The portrait of the ancestral Denny stared down at us, reminding us that we were in the offices of a very respectable law firm and we had better behave accordingly. Denny did the introductions, mentioning that Felicity had been responsible for drafting the documents. She looked tired, which wasn't really surprising. She had had an awful lot to do in not very much time.

There were really only two people in the meeting, Hamilton and Piper. Piper began, 'Cash has told me a lot about your operation, Mr McKenzie. I must say it sounds very successful. I am familiar with a number of similar outfits in the US, and they all do very well.'

Hamilton ignored the flattery completely. He came straight to the point. 'Tell me about Mix N Match,' he said.

Piper leaned back in his chair, and made an arch with his fingers, shooting starched white cuffs and monogrammed gold cuff-links out from under his jacket sleeves. 'I have been investing in companies one way and another for twenty years now, and I am pretty good at it. Once every decade comes an opportunity that's too good to miss, an opportunity to risk a substantial sum in the near certainty of making a killing. Everyone comes across such opportunities, but most people don't recognise them for what they are. They make a quick buck and nothing more. Now, Mix N Match is one of those rare opportunities. Limited downside, plenty of upside. This company will be taken over by the Japanese,' Piper paused to emphasise his conviction, 'and when it is I am going to make a lot of money.'

Hamilton gazed at him, expressionless.

'Do you want to join me?' said Piper.

Hamilton kept quiet, waiting for Piper to say more. But Piper was not going to say any more, and refused to be pressured into it. The silence must have lasted a minute, with none of the rest of us daring to break it.

Finally, Hamilton asked another question. 'You don't have much experience of retailing as far as I'm aware, Mr Piper,' he began.

'Just call me Irwin,' interrupted Piper.

'Very well, Irwin,' said Hamilton reluctantly. 'As I was saying, you don't have much experience of this sector. How did you come across this opportunity?'

I shifted uneasily in my chair. We were on to dangerous ground here. This was one question we had not rehearsed.

Piper stood up, and walked over to the window to look out at the quiet street below. He's playing for time, I thought.

He turned round. 'My wife's family used to live in Japan, and she still has some Japanese friends. One of them is married to a senior executive in a Japanese retailing firm. She was over in America, and dropped in on us at the Tahiti. She was on her way to Florida to meet her husband, who was there on business. I checked out her husband's company. They had announced they were determined to make an acquisition in America this year. Mix N Match is the obvious target. I spoke to Cash, who got me some research on the company, and here we are.' Piper held out his arms and smiled. 'Of course I would rather you did not repeat any of that outside this room.'

Silence again as Hamilton weighed up Piper's answer. I found Hamilton's silence rude and intimidating, but Piper's urbanity seemed intact.

'So why should we work together?' Hamilton asked at last. 'Why shouldn't I just trot off and buy the bonds myself.'

'I would be disappointed if you did that,' said Piper, 'especially since the idea came indirectly from me via Cash.' Piper managed to imply with those words that what Hamilton had suggested was the lowest of the low ethically. He stood by the window, tall, sleek and in control, looking down on the still-seated Hamilton. I admired his ability to take the moral high ground in such murky circumstances. 'But there is a more pragmatic reason for joining forces. If we act with one voice, we will be much more effective in negotiating with the acquirer of Mix N Match once it has been taken over. We will do that much better if we all own the bonds at the same price. And, if we all rush out and buy every bond we can in competition with each other, then the price will shoot up and none of us will end up with anything. Much better to do it slowly and carefully, pooling all our interests through one vehicle.'

'I suppose I can see that,' said Hamilton.

'Well, are you with us?' Piper said. 'If we are going to move, we had better move quickly.'

'I will need to think about it,' said Hamilton.

Cash cleared his throat. 'Hey, I understand you got to think about this one. But if you do decide to go ahead, as Irwin says, we got to move quickly. The rumours are already around the street. I know some big holders of Mix N Match bonds who are keen to sell, but we will have to go to them in the next couple of days. That means we will have to be ready to set up the SPV at short notice. Why don't you go through the documentation now? Know what I'm saying?' Cash nodded towards the pile in front of Felicity. You had to admire Cash's salesmanship, I thought, a great close.