The receptionist eyeballed him, gave him a sour look, and slowly shook her head as he stepped forward. She pointed down the thickly-carpeted corridor. “He’s ready for you.”
The walk to Stone’s office seemed interminable. He picked at the lint on his jacket as he moved to the corner office. He lightly knocked once on the office door.
“Come in,” Stone shouted, sounding impatient.
Summers opened the door, took one step into the office, and stopped. Stone’s desk backed up to a bank of windows that looked down on Wall Street. The man was seated, back to the windows, phone to his ear. Stone waved him forward.
The distance from the entrance to the desk was at least fifteen yards. Summers felt as though he walked a plank as he approached the partner. He badly wanted to sit down, to make himself as small as possible, to hide the damage he’d done to his suit. But he knew he should wait until Stone told him to sit. Thankfully, Stone waved his free hand, directing him to a chair.
Summers removed from his file the report he’d prepared, placed it on the front of Stone’s desk, and held the file folder like a shield against his chest.
Stone suddenly ended his conversation, slammed down the receiver, and glared.
“You’ve got five minutes,” the man said as he picked up the report. “Make the most of them.”
Summers cleared his throat, babbled for a couple seconds, then launched into his presentation. “Sunrise Casualty Insurance has given us first right of refusal on a two point four-billion-dollar commercial mortgage-backed security, collateralized by three point five billion dollars’ worth of triple-A office buildings. That’s about a sixty-nine percent loan to value ratio. The leases in the buildings are seasoned and ninety percent of the tenants are national credits. Average remaining lease terms are eleven years.”
“Why is Sunrise doing us this big favor?” Stone demanded.
Summers had anticipated the question. “They’re under pressure from the New York State insurance regulator and the rating agencies. Their real estate exposure is too high, according to industry standards. My contact didn’t say so, but he inferred they’re being forced to liquidate some of the real estate assets in their portfolio.”
“Why us?”
“Because, if they put the deal out on the open market, they’ll effectively tell the world they have a problem. That could negatively impact their stock and bond values. Also, they prefer working with a privately-owned firm like us.”
Stone scanned Summers’s report, then suddenly popped his head up. His piggy eyes wide, his jowls shaking, he stared and said, “Is this correct? They’ll pay us a twenty-four million dollar underwriting fee and sell the security at a two percent discount?”
“That’s right.”
Stone’s expression turned predatory. “You realize this means they’ll probably agree to a larger discount, if they’re under as much pressure as you think.”
Summers felt a chill and shrugged. Stone’s going to get greedy and kill this deal, he thought.
Stone turned to the report’s next page. “What the—? They’ve got to be kidding. They want to close by the end of the month. That’s three days.”
“They want the security off their books before their next Department of Insurance examination in early December.”
“Ha,” Stone blurted. His fingers moved like octopus tentacles as he said, “Come to papa.” He showed his predatory expression again. “Summers, here’s what I want you to do. Tell your guy at Sunrise we’ll do the deal for a five percent discount.”
Summers’ heart seemed to drop into his stomach. He visualized his bonus flying out Stone’s window and scattering like ashes onto Wall Street. “I don’t think—”
Stone raised a hand. “Listen closely. You’ll tell him we want five percent. He’ll go from two percent to three percent. You’ll counter at four and finally agree to three-and-a-quarter, maybe three-and-a-half.”
Summers didn’t think it would work. He’d thought a three percent discount would be almost impossible. Anything higher would be a miracle. But he couldn’t help himself as he rode the elevator back to his floor. He whispered over and over, “Three-and-a-half percent plus one percent underwriting fee is one hundred and eight million dollars. A ten million, eight hundred thousand dollar bonus. Holy shit!”
As he walked across the executive suite to Sy Rosen’s office, Stone wondered why Wayne Summers’s pants and suit jacket had been covered in lint. But he put it out of his mind as he opened Rosen’s door. “You got a minute?”
“Sure. What’s up?”
“We should get Karl in here.”
Rosen’s brow furrowed. “You seem excited.”
“Oh, yeah.”
Rosen buzzed his secretary and told her to find Karl Rice.
Rice showed up a couple minutes later. “Everything okay?” he asked as he took a seat across from Rosen and next to Stone.
“More than okay,” Stone said. After he described the Sunrise deal, he sat back in his chair and waited.
Rosen’s face flushed. He picked up his letter opener and tapped a furious beat with it on his desk blotter. “That’s a deal of a lifetime,” he said. “But can we get the securities laid off? We have enough cash to cover one-and-a-half billion of the deal. But we’ll need another seven hundred million, after deducting the underwriting fee and a three point five percent discount. By the time we package the deal for our investors, it could be mid-December. We’d be hanging out for over two weeks with no cash and a massive short-term loan at the bank.”
“Whoa, guys,” Rice interjected. “One billion of that one-and-a-half billion in cash you just mentioned is client money in our trust accounts. We can’t—”
“Bullshit,” Rosen said. “We can do whatever we want. Besides, we’ll pay the clients two percent interest on the money we use. That’s more than they get at a bank.”
Stone said, “We’ve had that line of credit at the bank for years; been paying a commitment fee to those bastards and never used it. The risk/reward ratio on this deal is hugely in our favor.”
Rice wagged his head, “I don’t know, guys.”
“Grow some balls,” Rosen said. “How often do we get a chance to make over one hundred million dollars to underwrite a deal? Like, never.”
“I hear you,” Rice said. “But, what if we can’t lay off the bonds to investors? Our firm will be in jeopardy. Our entire capital base could be wiped out. We’d be bankrupt.”
“Whoa, Karl, what’s with you?” Stone said. “Our capital won’t be at risk. The worst case is that we can’t offload the Sunrise security at face value. We’d wind up selling it for what we paid—maybe for even more than we paid—but keep the twenty-four million dollar underwriting fee. We put the billion back in our clients’ accounts and pay off the seven hundred-million-dollar loan at the bank. Our own half-a-billion would be back in our capital account.” He glared at Rice and added, “Remember that Sunrise is no fly-by-night operation. They’re a legitimate firm that’s been in business for over one hundred years. They have a triple-A rating from Fitch, S&P, and A.M. Best. We’ll make a fortune off this deal.”