The Fourth Estate (77 page)

The future of
both companies now rests in the hands of their bankers, who must be
wondering-like the creditors of a Third World nation-if they will ever see the
interest, let alone the longterm debt, being repaid. Their alternative is to
cut their losses and agree to participate in the biggest fire sale in history.
The final irony is that it would only take one bank to break the link in the
lending chain and the whole edifice will come crashing down.

As one insider
put it to me yesterday, if either man were to present a check at the moment, their
check would bounce.

Tom was the
first person off the train when it pulled in to Grand Central station. He ran
to the nearest phone booth and dialed Townsend’s number.

Heather put him
straight through. This time Townsend listened attentively to his lawyees
advice.

When Armstrong
finished reading the article he picked up an internal phone and instructed his
secretary that if Sir Paul Maitland should call from London, he was out. No
sooner had he replaced the receiver than the phone rang.

“Mr. Armstrong,
I’ve got the chief dealer at the Bank of New Amsterdam on the line. He says he
needs to speak to you urgently.”

“Then put him
through,”‘ said Armstrong.

“The market is
being flooded with sell orders on Armstrong Communications stock,” the dealer
informed him. “The share price is now down to $2.3 1, and I wondered if you had
any instructions?”

“Keep buying,”
said Armstrong without hesitation.

There was a
pause. “I must point out that every time the shares drop a cent, you lose
another $700,000,” said the chief dealer, quickly checking the number of shares
that had been traded that morning.

“I don’t care
what it costs,” said Armstrong. “It’s a shortterm necessity.

Once the market
has settled again, you can release the shares back onto the floor and gradually
recoup the losses.”

“But if they
continue to fall despite...”

“You just keep
on buying,” said Armstrong. “At some point the market is bound to turn.” He
slammed down the phone and stared at the photograph of himself on the front
page of the Financial Tintes. It wasn’t flattering.

The moment
Townsend had finished reading the article, he took Tom’s advice and called his
merchant bankers before they called him. David Grenville, the chief executive
of the bank, confirmed that Global shares had fallen again that morning. He
felt it would be a good idea if they met as soon as possible, and Townsend
agreed to reschedule his afternoon appointments to fit in a meeting at two
o’clock. “You might find it worthwhile to have your lawyer present,” Grenville
added ominously, Townsend instructed Heather to cancel all his afternoon
appointments. He spent the rest of the morning being briefed on a seminar that
the company was due to hold the following month. Henry Kissinger and Sir James
Goldsmith had already agreed to be the keynote speakers. It had been Townsend’s
idea that all his senior executives throughout the world should get together in
Honolulu to discuss the development of the corporation over the next ten years,
where Multi Media fitted into the overall company structure, and how they could
best take advantage of their new acquisition. Would the seminar end up having
to be canceled too, he wondered? Or would it turn out to be a funeral service?

It had taken
twenty-seven frantic days to put together the financial package to acquire
Multi Media, and many more sleepless nights wondering if he had made a
disastrous mistake. Now it appeared as if his worst fears had been confirmed by
a hack on the Financial Times. If only he had failed to make the deadline, or
had listened to Tom in the first place.

His driver
turned into Wall Street a few minutes before two and drew up outside the
offices of J.P. Grenville. As Townsend stepped out onto the pavement, he
remembered how nervous he had been when he had first been summoned to his
headmaster’s study almost fifty years before. The huge plate-glass door was
opened by a man in a long blue coat. He touched the rim of his top hat when he
saw who it was. But for how much longer would he do that, Townsend wondered.

He nodded and
walked on toward the reception desk, where David Grenville was deep in
conversation with Tom Spencer. The moment they saw him both men turned and
smiled. They had obviously been confident that this was one appointment he
would not be late for. “Good to see you, Keith,” said Grenville as they shook
hands. “And thank you for being so prompt.”

Townsend smiled.
He couldn’t remember his headmaster ever saying that. Tom put an arm round his
client’s shoulder as they walked toward a waiting elevator.

“How’s Kate?”
asked Grenville. “When I last saw her she was editing a novel.”

“it was such a
success she’s now working on one of her own,” said Townsend.

“if things don’t
work out, I might end up living off her royalties.”

Neither of his
two companions made any comment on his gallows humor.

The lift doors
slid open at the fifteenth floor, and they walked down the corridor and into
the chief executive’s of -fice, Grenville ushered the two men into comfortable
chairs, and opened a file on the blotter in front of him. “Let me begin by
thanking you both for coming in at such short notice,” he said.

Townsend and his
lawyer both nodded, although they knew they hadn’t been left with a lot of
choice.

“We have had the
privilege,” said Grenville, turning to Townsend, “of acting on behalf of your
company for over a quarter of a century, and I would be sorry to see that
association come to an end.”

Townsend’s mouth
went dry, but he made no attempt to interrupt.

“But it would be
foolish for any of us to underestimate the gravity of the situation we are now
facing. On a superficial study of your affairs, it looks to us as if your
borrowings may well exceed your assets, possibly leaving you insolvent. If you
wish us to remain as your investment bankers, Keith, then we will do so only if
we are guaranteed your full co-operation in trying to solve your current
dilemma.

“And what
does’full co-operation’ mean?” asked Tom.

“We would begin
by attaching to your company a financial team under one of our most senior
banking officers, who would be given complete-and I mean complete-authority to
investigate any aspect of your dealings we felt necessary in order to ensure
the company’s survival.”

“And once that
investigation has been completed)” asked Tom, his eyebrows rising.

‘The banking
officer would make recommendations which we would expect you to carry out to
the letter.”

“When can I see
him?” asked Townsend.

“Her,” the
bank’s chief executive replied. “And the answer to your question is
immediately, because Ms. Beresford is in her office on the floor below us
waiting to meet you.

“Then let’s get
on with it,” said Townsend.

“First I must
know if you agree to our terms,” said Grenville.

“I think you can
assume that my client has already made that decision,” said Tom.

“Good, then I’ll
take you down to meet E.B. so she can brief you on the next stage.”

Grenville rose
from behind his desk, and led the two men down a flight of stairs to the
fourteenth floor. When they arrived outside Ms Beresford’s office, he stopped
and gave an almost deferential knock.

“Come in,” said
a woman’s voice. The chief executive opened the door and led them into a large,
comfortably furnished room overlooking Wall Street.

It gave an
immediate impression of being occupied by someone who was neat, tidy and
efficient.

A woman Townsend
would have guessed was around forty, perhaps forty-five, stood up and came from
behind the desk to greet them. She was about the same height as Townsend, with
neatly cropped dark hair and an austere face almost hidden by a rather large pair
of spectacles. She wore a smartly-cut dark blue suit and a cream blouse.

11 Good
afternoon,” she said, thrusting out her hand. “I’m Elizabeth Beresford.”

“Keith
Townsend,” he said, shaking her hand. “And this is my legal counsel, Tom
Spencer.”

“I’ll leave you
to get on with it,” David Grenville said. “But do drop into my office on the
way out, Keith.” He paused. “if you still feel up to it.”

‘Thank you,”
said Townsend. Grenville left the room, closing the door quietly behind him.

“Please have a
seat,” said Ms. Beresford, ushering them into two comfortable chairs on the
opposite side of her desk. As she returned to her own seat, Townsend stared at
the dozen or more files laid out in front of her.

“Would either of
you care for coffee?” she asked.

“No, thank you,”
said Townsend, desperate to get on with it. Tom also shook his head.

“I am a company
doctor,” began Ms. Beresford, “and my task, Mr. Townsend, is quite simply to
save Global Corp from a premature death.” She leaned back in her chair and placed
the tips of her fingers together. “Like any doctor who diagnoses a tumor, my
first task is to discover whether it is malignant or benign. I have to tell you
at the outset that my success rate in such operations is about one in four. I
should also add that this is my most difficult assignment to date.”

‘Thank you, Ms.
Beresford,” said Townsend. “That’s most reassuring.”

She showed no
reaction as she leaned forward and opened one of the files on her desk.

“Though I’ve
spent several hours this morning going over your balance sheets and despite the
additional research of my excellent financial team, I am still in no position
to judge if the Financial Times’s assessment of your company is accurate, Mr.
Townsend. That paper has satisfied itself with an educated guess that your
liabilities exceed your assets. It is my job to be far more exacting.

“My problems
have been compounded by several outside influences. Firstly, having gone
through your files, it is clear for anyone to see that you suffer from a
disease common among self-made men-when you’re closing a deal you’re fascinated
by the distant horizon, so long as you can leave it to others to worry about
how you get there.”

Tom tried not to
smile.

“Secondly, you
appear to have made the classic error which theJapanese so quaintly describe
as’the Archimedes principle’-namely that your latest deal is often greater than
the sum of all your other deals put together.

“Specifically,
you went ahead and borrowed $3 billion from a number of banks and institutions
for the purpose of taking over Multi Media, without ever considering if the
rest of the group could produce the cash flow to sustain such a vast loan.” She
paused and placed the tips of her fingers together again. “I find it hard to
believe that this was a transaction on which you took professional advice.”

“I did take
professional advice,” said Townsend. “And Mr. Spencer tried to talk me out of
it.” He glanced toward his lawyer, who remained impassive.

“I see,” said
Ms. Beresford. “if I fail, it will be the reckless gambler in you that will
have been the cause of your downfall. Reading through these files last night
and into the early hours of this morning, I came to the conclusion that the
only reason you have survived so far is that over the years you have just about
won more than you have lost, and your bankers, although often nearly driven to
distraction, have – sometimes against their better judgment-retained their
confidence in you.”

“is there going
to be any good news?” asked Townsend.

She ignored the
question and continued, “My first responsibility will be to go over your books
with the clich~d fine-tooth comb, study every one of your companies and its
commitments-whatever their size, in whatever country, in whatever currency-and
try to make some sense of the overall picture. If, when that is done, I
conclude that Global Corp is still solvent in the legal sense of the word, I
will move on to the second stage, which will undoubtedly mean selling off some
of the company’s most treasured assets, to many of which I feel sure you will
have a personal attachment.”

Townsend didn’t
even want to think about which treasures she had in mind.

He just sat
there, listening to her mortician’s diagnosis.

“Even assuming
that process is satisfactorily completed, as a contingency plan we will then
have to draft a press release setting out why Global Corp is filing for
voluntary liquidation. Should it prove necessary, I would release it to Reuters
without delay.”

Townsend gulped.

“But if that
step proves unnecessary, and we are still working together, I will go on to
stage three. This will require me to visit every bank and financial institution
with which you are involved, in order to try to convince them to give you a
little more time to repay your outstanding loans. Though I must say that if I
were in their position, I would not do so.”

She stopped for
a moment, then leaned forward and opened another file. “It appears,” she said,
reading from a handwritten note, “that I would have to visit thirty-seven banks
and eleven other financial institutions based in four continents, most of which
have already been in touch with me this morning. I only hope I’ve been able to
stall them long enough for us to make sense of all this.” Her hands swept the
air above the files on her desk. “if, by some miracle, stages one, two and
three can be completed, my final task-and by far the most difficult-will be to
convince those same banks and institutions, currently so apprehensive about
your future prospects, that you should be allowed to put together a financial
package to ensure the long-term survival of the company. I will not be able to
reach that stage unless I can prove to them, with independently audited
figures, that their loans are secured on real assets and a positive cash flow.
On that subject, you will not be surprised to learn, I still need to be
convinced myself. And don’t imagine for one moment that should you be fortunate
enough to reach stage four, you can relax. Far from it, because that is when
you’ll be told the details of stage five.”