I just kept my mouth shut and listened to Mark lay out a suggestion that the Buckman Group loan Lefleur Homes a buttload of money. Big Bob was ambitious, I’ll give him that much. He wanted $4 million as a floorplan loan, which would allow him to increase the number of homes they had on display, remortgage the properties at headquarters and the other locations, and provide another $2 million in lines of credit for operating capital. All in all, as I added it up in my head, he wanted the Buckman Group to retire all his old debt and provide extra debt, to the tune of a total of $8 million dollars. The company only had annual sales of $20 million! It was all I could do to keep from both laughing and crying. It was the definition of chutzpah!
It was actually even worse. Since his beloved son-in-law would never be so crass as to actually demand repayment on anything, Big Bob would be free to keep borrowing from other sources. I might as well just pile the dollar bills on his desk and set them on fire.
On the other hand, turning him down could fuck up my marriage. It was like the line in The Merchant of Venice — ‘My daughter! My ducats!’ I would probably have to do something, but what?
I listened and thought for a moment, and then tried to answer very, very carefully. “I have to tell you, Bob, this takes me by surprise.”
“Carl, Harriet and I have told you, call us Mom and Dad,” he responded with a smile.
I only gave a half smile in return. “If we are doing business, it will need to be Mister Lefleur, hmmm?” Big Bob didn’t look as if he liked the sound of that, though Mark seemed content with it. “First things first — the Buckman Group is not a bank. We are not empowered to make business loans, nor have we ever done so. The same applies to the floorplan business. We have nobody who would be able to do the monthly verifications necessary in any case.” Floorplan lenders make a monthly drive-through on a sales lot, to check that the home or car or RV is actually there, and hasn’t been sold off without the loan being paid back. If you don’t pay the floorplan off when the vehicle leaves, then you are ‘out of trust’, and have just committed title fraud. A bank will shut you down fast enough to make your head spin!
Mark nodded in understanding. “Perhaps an alternate choice might be to provide a loan guarantee to an alternate floorplan source, where they already have the mechanisms in place,” he said, a little too smoothly. He already knew we weren’t doing the floorplan.
“Uh huh,” I replied in my most noncommittal voice. “As I said, we aren’t a bank, and anything of this nature would require approval by my board of directors, and that is not a guarantee. The Buckman Group buys equity in a company, stock positions. Is that what we are talking about here? A sale of stock to us?” That was a nice shot across the bow.
Big Bob took it as such. He looked like I had just pissed in his coffee cup. “That wouldn’t be fair to the other kids.”
I didn’t make a response other than a subtle shrug of the shoulders. I turned back to Mark. “What’s going on here? You are looking to replace all of your financing. Why? What’s wrong with your existing package?”
“GE is making noises like they are getting out of the floorplan business, or at least changing their rates and terms. Very few local banks are going to be interested in floorplanning homes,” explained Mark.
“What about Greentree or Conseco? Tammac? GMAC?” These were all names that had been in the floorplan business at one time or another.
Big Bob’s eyes opened wide as I rattled them off. I don’t think he realized just how much I knew about his business. Mark took it in stride. In many ways he was a much more sophisticated businessman than Big Bob. “Most of them don’t want the entirety of the business, so we would need to split floorplan between them, and there would probably be some changes in secondary agreements involved.”
“In other words, they want stricter loan covenants, don’t they?” Loan covenants are requirements that the borrower agrees to, above and beyond the repayment of the loan. Typical covenants might include maintaining a maximum debt to equity ratio, prohibitions on other financing or on the use of the financing, requirements for independent auditing of financial results, minimum cash flows, and so forth. Even if you are current on your loan payments, if you violate a covenant, you are in technical default and the loan can be called. It’s a gun the bank can hold to your head to make sure you don’t waste their money.
Mark grimaced slightly, and Big Bob looked like he was swallowing a shit sandwich. “There have been some indications that loan covenants might become more restrictive,” replied Mark.
I nodded. “Well, I can understand that. I would imagine any new lender would want to build a history before relaxing on the covenants. Certainly if that was the type of business the Buckman Group was in, and we took on a new client, we would expect similar sorts of covenants in place.” Another shot across the bow — we would be just as pushy as the banks.
This was not working out like Big Bob had figured. He was looking at this like a father, and I was looking at it as a business. He really couldn’t conceive of any of his children not going along with him on something business related, and he had absolutely zero control on me, other than the fact that he could turn his daughter against me. He tried telling me about the wonders of the business and I just asked about what the proposed covenants were that he didn’t like. Emotion versus logic, but I was the one with the money.
After a few minutes I made the time-out sign. “Give me a few minutes. I want to talk to Marilyn first.” I stood and left the room, and Big Bob immediately lowered his head and started talking quietly to Mark. If I was a betting man — and I was — I would have bet that Mark had already told him this was a crappy idea and I wouldn’t go along with it. If I was smart enough to make my kind of money, I was too smart to invest in Lefleur Homes!
I left the office and found Marilyn chatting with her mother in the kitchen of the new building. I came up behind her and tapped her on the shoulder. “We need to talk,” I said.
Her face lit up when she saw me. “Mom was just saying you’re investing in the company!”
I looked at Harriet but didn’t smile. “Yeah? Like I said, we need to talk.”
Both Harriet and Marilyn stopped smiling. Marilyn stood up and I led her outside. I walked away from the office building and over to the home lineup, where I sat down on one of the steps and Marilyn sat down next to me. “What’s up? You don’t look happy.”
“I’m not. Did you know about this ahead of time?”
“No, Mom told me what was happening after you went and saw Dad.”
“You had absolutely no hint about this?” I pressed.
“No! Like I said, she only told me after you left. Why? What’s wrong? You don’t want to invest in the company?” she asked.
I sighed. “Not in a million years! They don’t want me to invest in the company. They want me to loan them eight million dollars with no restrictions on what they do with it! We’re not a bank! We buy and sell stocks and pieces of companies! We don’t loan money! This is insane!”
“That’s not the way Mom explained it to me. Eight million dollars? What in the world? You don’t want to loan them the money?”
“It’s like I said, we don’t loan money. We buy portions of companies, and only if they are well managed and growing companies. If I was the owner of this company, the first thing I would do is fire your father, and then I’d fire half your brothers and sisters! They’re a disaster!”
“Carl!”
“Marilyn, I love you with all my heart, but it is the God’s honest truth. Your father is an absolutely great father, and an absolutely horrible businessman. Get rid of him, and stop running this place like an employment agency for your family, and you could grow this company to three times the size it is now! No sweat! It’d be easy!”