What Goes Around
In November 1985, I was sitting in my corner office on the third floor of 280 Park Avenue. I used to call that the “cafe” office because it was close enough to the street to feel a part of the hub-bub out on Park Avenue and yet it was above it all. To be clear, I was thirty-one years old at the time, which is almost hard for me to imagine in the sense that it seems such a young age to be wielding the commercial power I did. I had spent the year running the New York City Division of Bankers Trust. It was the pinnacle of success in our merchant banking firm because it was responsible for the biggest and best multinational clients we had, all within walking distance from our offices on the “Miracle Mile” that was that small stretch of Park Avenue that housed the headquarters of every major bank other than J.P. Morgan, who had remained in its historic offices at the corner of Broad and Wall Streets. Just an interesting side-note, but those iconic JPM offices at 23 Wall Street came under my ownership control twenty-five years later when the company I controlled sold it to a shady Chinese quasi-government entity and tried to lease it for them to Whole Foods, among other potential tenants. What goes around, comes around.
That day I got a call from our Vice Chairman, an avuncular guy I had known for a decade and one of the best-liked guys in bank. He was the old world image of a friendly community banker, not anything like Snidely Whiplash (“You MUST pay the rent” from Rocky & Bullwinkle) or the new age image of the slick investment banker. He called me into his Executive Suite office on the vaunted seventeenth floor, just past the lovely indoor Japanese gardens right out of a Ryokan. He asked me if I would be willing to take a reassignment. The firm’s biggest issue of the day was its portfolio of $4 billion of sovereign debt owed by Less Developed Countries (LDC’s), mostly in Latin America. That debt had largely gone into the rigor mortis of restructuring, which was a euphemism for non-payment. That was a problem when our eighty-two-year-old bank, the sixth largest in the country, and one of the true “white shoe” firms of Wall Street (It’s historic headquarters were at 16 Wall Street, catty-corner from those JPM offices I mentioned, and recognizable by the pyramid on its top where JP himself maintained a power-suite of his own back in the day), had a capital base of a mere $1 billion. What goes around, comes around.
I was taken aback by the invitation for the new position, but I accepted it on the spot since I was the epitome of the good corporate soldier who was used to saluting and jumping as high as the firm asked me to jump. He told me that I would be given the ability to source whatever team of people from the bank that I wanted both from the existing Latin America Division, but also from ANY other area of the bank I wanted. I was being given the famous 007 “license to kill” card and it was a heady moment at the very least for a thirty-one-year-old. I took the moment to ask the Vice Chairman if I was being asked to do this because they knew I had lived six years in my youth in Latin America? Or maybe it was because they understood that I had spoken Spanish before I had ever spoken English? Or perhaps because they knew that at Cornell I had majored in development economics and third-world government? To that the Vice Chairman raised his eyebrows and said, with genuine surprise, “oh, you did?” What goes around, comes around.
I was immediately promoted to Senior Vice President. That didn’t stop my waggish friend in the bank reminding me that if the bank disliked you they fired you, but if they HATED you, they sent you to Latin America. I took to the task immediately, calling in all my chips with friends that had an adventurous nature and the diverse skill sets (trading, financial structuring, hardscrabble lending, M&A, leveraged finance, etc.) I thought might prove useful. We formed the Bankers Trust version of The Dirty Dozen and took up some space in the building away from the more genteel ongoing business areas. We added to that the best and brightest from the existing Latin America Division, people who knew the terrain. So we had the skills and the local knowledge for the sortie, and then just needed a plan of attack. Do you remember the movies The Eiger Sanction and The Guns of Navarone? This mission would need a very clever plan to attack a massive life-threatening combatant against all odds. At one of our first collective meetings all the skill-set guys sat on one side of the table and all the local knowledge guys sat across on the other side. I was leading them through a discussion of the state of affairs when a Latinist mentioned a guy from Argentina that was a mover and shaker in the financial field. The skill set guys asked who he was. The answer was a wise-crack of, “He’s sort of a Professional Latin American.” That just caused the antagonist to ask, “What exactly is a Professional Latin American?” That gave rise to the wonderful retort of, “Sort of the opposite of what you are, Amateur Latin Americans.” What goes around, comes around.
We spent the next four years learning how to work with one another against the establishment, meaning both the sovereign borrowers AND the other big banks and government agencies, that were taking a more traditional path. We were a little guy compared to the likes of Citibank, Chase, the World Bank and the IMF. As a team, we actually congealed into a cohesive hit squad and we proceeded to do hundreds of millions of dollars of deals, mostly in the arcane arena of debt-for-equity swaps. That gave rise to both proprietary opportunities using our own capital (meaning our own increasingly deeply-discounted debt) and also an increasing array of third-party deals that actually built up a very profitable and very new LDC Investment Banking franchise. We had become a phoenix, rising from the ashes of the LDC crisis. What goes around, comes around.
I became quite a student of sovereign debt crises, studying history for clues. The tales go back through the centuries, through the Middle Age City-State defaults in Europe to the Phoenician trade non-payment problems in Ancient Mediterranean History. One observation I made was there seemed to be a pattern of default about every thirty years of so that took on differing forms. In recent history we had nationalizations and expropriations and now debt restructuring and default. The bottom line was always the same, what was mine is now yours. I just noticed today that Zambia and Argentina have hired Lazard to help “advise” them on their massive overburden of sovereign debt, which is estimated to be the tip of the post-Coronavirus sovereign debt iceberg (this time the size of an entire polar ice cap). That would be thirty years since the Brady Plan “ended” the mid-80’s sovereign debt crisis. What goes around, comes around.