I was still angry. But soon something happened which took my mind off money-laundering, Martin Beldecos’s murder, and Eduardo. The Brady battle.
11
The battle started at seven fifteen on Wednesday morning. We started it. Or rather Ricardo did.
The battlefield was my Argentine Discount bond issue.
These bonds had been born out of Argentina’s Brady plan, named after the US Treasury Secretary, Nicholas Brady, who had sponsored the original idea. During the early 1990s, the banks who had lent billions to Latin America agreed to swap their defaulted loans for bonds, which could then be traded. These became known as Brady bonds. In the next few years most of the major Latin American countries had undergone a Brady plan, leaving over a hundred billion dollars of Brady bonds outstanding. Needless to say, Dekker had a lot of fun trading them. The Argentine Discounts, or ‘Argy discos’ as they were known, were one of the three classes of bonds created out of the Argentine Brady plan in 1992.
After the usual round of comments from everyone, Ricardo told us his idea. ‘As you guys all know, Argentina has been cheap for a while, and it’s getting cheaper. There’s no good reason for it. Cavallo’s peso plan is working and their banking crisis is under control. We’re not going to see another Mexico meltdown down there.’ He was referring to the crisis that had hit Mexico after the disastrous devaluation of its currency in December 1994.
‘The discos are cheap. We know that the Shiloh Fund has been offloading a ton of them into the market. So that’s where we’ll move. Pedro and I have picked up two hundred million so far, but that’s just a start.’
I caught my breath. Two hundred million! Ricardo hadn’t been exaggerating when he had told me he had bought a lot of bonds. I couldn’t help feeling a little proud. Of all the bonds in all the world, Ricardo had picked mine to do a number on. I listened in anticipation.
‘Now, the Discounts are the smallest of the three Argentine issues with just over four billion dollars outstanding. That’s still quite a lot of bonds, but we think that up to three billion is locked away by people who won’t sell at these prices, mostly because they’d have to book a loss. So if we pick up four or five hundred million we should really move the market. Get these bonds trading where they should be.’
There was a chuckle from the assembled group. ‘I like it,’ said Dave.
‘Do we cut in our customers yet?’ asked Jamie.
‘Not quite yet,’ said Ricardo. ‘We’ll edge up our bids on the discos today to see what we can pick up. But don’t encourage your accounts to sell unless they really have to. You don’t want to look fools tomorrow. Any other questions?’
Nothing.
‘Anything else?’
Carlos Ubeda, the head of Capital Markets, spoke up. ‘Yes, one thing, Ricardo. We need to bid for the Mexican deal tomorrow. Two billion dollars, five years.’ Carlos meant that Mexico wanted to borrow two billion dollars from the markets through a bond issue, and they had asked us to quote them a price at which we would lead it.
‘Two billion! I thought they only wanted one. That’s huge. Why so much?’
‘They’ve got a lot of debt to repay this year. And you know the Mexicans. They like to show the world that they can do bigger deals than anybody else.’
‘This is hardly the time for it. What price do you think will get it?’
‘I think we might need to go inside ten per cent.’
Ricardo winced. ‘That’s tight.’
‘The competition’s tough.’
‘OK, everyone. Ask your customers what they’re hearing about Mexico. See if we can find out what price the competition are talking. But make sure that they know we think it should be at least ten per cent.’
The meeting broke up. I followed Jamie to his desk.
He grinned at me, his eyes twinkling, and rubbed his hands. ‘We’re going to have some fun today.’
He picked up the phone to his old regulars. He was calm as if this was just any other day, but the calls were crisper than usual. Less chat.
He ran through our prices with Chris Frewer of Colonial and Imperial, a London-based fund manager.
‘Heard anything about a new deal for Mexico?’ Jamie asked.
‘Yeah. Bloomfield Weiss say they might be bringing a big one.’ Frewer was English, and he sounded the same age as Jamie and me.
‘Oh, yes? Any price talk?’
‘A touch over ten per cent. Are you involved?’
‘Are we involved?’ Jamie snorted. ‘Of course we are. I’ll let you know when I hear more.’
‘Hold on! Before you go, did you say sixty-eight and a half bid for the Argy discos?’
‘That’s right.’
‘Is that good for ten?’
‘Good for ten, good for fifty,’ Jamie said. He dropped his voice to a whisper. ‘But if I were you I wouldn’t rush into anything this morning.’
‘Oh, yes?’ A note of interest had entered Frewer’s voice. He wasn’t stupid. ‘And why not?’
‘Well, I could give you a lot of economic bullshit, but I don’t want to waste your time. Let’s just say they’re going up.’
Frewer thought for a moment. ‘OK. I’ll hold off and watch.’
‘Sound decision. But, Chris?’
‘Yes?’
‘You won’t go off and buy any yet, will you?’
Frewer laughed. ‘Of course not. Keep me posted.’
As Jamie put the phone down, I asked him something that had been bothering me. ‘Are we being fair?’
‘What do you mean?’
‘Building up a position in a bond issue before recommending it to our customers.’
Jamie smiled. ‘We’re not trading British Telecom on the London Stock Exchange. You’re on the wild and woolly shores of the emerging markets here. This is the law of the frontier. That’s exactly how guys like us make money.’
‘Ah.’
The sandwich man came round, and I grabbed a bacon and avocado on ciabatta. I fetched us both a cup of coffee. But we didn’t stop dialling and talking. Then, at about one, I heard the familiar hand-clap. I looked up. Ricardo was standing in the middle of the square of desks, making a T sign with his hands. Time out. The hubbub swiftly died down as all the phones went on hold. Everyone turned to watch him.
‘OK, compañeros, we’ve got three hundred and forty million of the discos at an average price of sixty-eight and a half. It’s time to go public. Tell your most favoured accounts first. Charlotte will release a research report in an hour’s time. Any bonds Pedro gets from now on he’ll use to fill customer orders. We want to cut our friends in. By now we should have hoovered up all the bonds dumped by the Shiloh Fund. From now on we’ll be taking the Street short, so the price should start to move.’
The group stirred in anticipation.
‘Now, anything on Mexico?’ Ricardo asked.
‘They’re talking a smidgen over ten per cent,’ said Jamie.
‘And who’s in the market?’
‘Bloomfield Weiss, apparently. They say they’re confident they’ll get the deal.’
Ricardo frowned. ‘Well, keep your ears to the ground. And don’t let anyone even dream of a yield of less than ten per cent.’
The meeting broke up and Jamie went straight on to his favoured customers. Chris Frewer chuckled and bought twenty million. By this time New York, Miami and all the South American cities were in. Andrea Geller at a small New York hedge fund bought another twenty. And Alejo bought fifty.
Alejo was Jamie’s biggest account. He was a serious punter. He worked out of Miami, but he ran the money of one of Mexico’s wealthiest families. Needless to say the deals were booked through one of the Dekker Trust numbered accounts. Jamie had apparently cultivated Alejo as a client during his previous job at Gurney Kroheim, and had taken him with him to Dekker.