The Evening News (62 page)

"Joint venture
?
”

Ironwood asked
"I'll explain. First, accept the fact that terrestrial broadcast-
ing--over-the-air television-is near the end of its useful life. Within
ten to fifteen years about the only place you'll find an old-fashioned
TV antenna is the Smithsonian; also by then, TV stations will have
abandoned their conventional transmitters as uneconomic
.”

"With cable and satellite dishes taking over
?
”

"Partly, but not entirely
.”

Margot smiled. She was dealing with a familiar
subject as well as demonstrating, she hoped, her own farsightedness
.”
The next thing to realize
,”
she continued, "is that there is no important
future in this business for cable operators alone. To survive, they must
pool resources-and so shall we-with the telephone people whose lines
already go into every home
.”
Several nodded approvingly as Margot declared, "The technology for a
combination phone and TV line, using fiber-optic cable, is available now
.
It's simply a matter of getting the system working, which includes a
network like ours developing specialized cable programming. The potential
revenues are enormous
.”

"Aren't there government restrictions
,”
Ironwood asked, "on phone companies
entering the broadcast business
?
”

"Restrictions which the Congress will change. We're working on that; in
fact legislation has been drafted
.”

"And you're convinced Congress will go along
?
”

Theo Elliott laughed
.”
If she is, it's with good reason. I assume most of
us here have read the book The Best Congress Money Can Buy. If not, it's
must reading for people like ourselves . . . What's the author's name
?
”

"Philip Stem
,”
Margot said
.”
Right. Well, just the way Stem described, Globanic Industries contributes
handsomely to every Political Action Committee affecting our concerns
,
which means congressional votes are bought and ready when we need them
.
When Margot wants those regulations changed, she can let me know. I'll pass
the word
.”

"There's talk of abolishing the PAC system
,”
DeWitt said
.”
And that's all it is-talk
,”
Elliott responded
.”
Besides, even if the name
is changed, you can be sure those in Congress will find some other way to
do exactly what they're doing now
.”

The forthright, off-the-record talk continued. However, the subject of the
Sloane family kidnapping was not brought up again.
Late in the morning it was the turn of K. Phocis ("Fossie") Xenos
,
chairman of Globanic Financial Services, to address his fellow CEO's
.
Three years earlier Tri-Trade Financial Services, as it was then, was a
consumer credit enterprise making loans to middleclass Americans from a
chain of storefront offices; it also sold life and casualty insurance
.
Globanic then bought out TriTrade, Theo Elliott seeing it as a ready-made
base-much simpler than starting a new company-for attracting
international investors seeking entrepreneurial risk and glamour. He put
Fossie Xenos in charge-a young second-generation Greek-American with an
MBA degree from Wharton, who had come to Elliott's attention through some
artful investment-bank maneuvers
.
Almost the first thing Xenos did was dispose of the consumer credit
business, which produced only modest profits, and close the storefront
offices; soon after, he terminated the insurance activity, describing it
as "small-time humdrum for mental midgets
.”

He was more interested in
something fresh and exciting on the monetary scene-leveraged buyouts
,
known as LBO's, financed by junk bonds
.
Since then, working with whatever happened to be "hot
”
financially
,
Fossie Xenos had created sparkling profits for Global Financial, plus a
dynamic reputation for himself. The last was why Margot Lloyd-Mason
viewed Fossie, who was the third possible candidate for the conglomerate
chairmanship, as her most formidable rival
.
Despite his manipulative skills and conquests, Fossie retained a boyish
manner, appearing at least eight years younger than the forty-one he was
.
His clothes were mostly casual, his hair untidy, the result of running
his hands through it as he talked in a rapid-fire staccato. He was
persuasive and convincing; that and a dazzling smile he flashed at
everyone were his personality strengths
.
Today Fossie Xenos reported on a complex, delicate and largely secret
project, now in its early stages but expected to produce a
multibillion-dollar bonanza for Global. It involved so-called
debt-to-equity swaps and a gigantic real estate investment fund, both relating to Peru, with Globanic working handin-glove with that country's government
.
As described by Fossie to his fellow CEO's, the steps and conditions were:

Currently, Peru had more than $16 billion of foreign debt on which it had defaulted, thereby cutting itself off from the international financial community which would lend it no more money. Peru, however, suffering a desperate economic crisis, was anxious to get back into reputable status and begin borrowing once more.Globanic Financial Services had quietly bought up $4.5 billion of Peru's outstanding debt-better than one quarterpaying an average five cents on the dollar, an outlay of $225 million. The original lenders of the money, mainly U.S. banks, were glad to sell even at that low price since they long ago figured they would get nothing back at all. Globanic had now "securitized
”
the Peruvian debt-that is, converted it into negotiable paper.
The government of Peru, through three of its ministers controlling finance, tourism and public works, had been informed they now had a matchless opportunity to wipe out that $4.5 billion of debt by buying the securitized debt from Globanic for ten cents on the dollar, but with all bookkeeping payments in Peru's own weak currency, the inti. This was Fossie's cleverly baited hook because in that way the country's small and precious store of other countries' hard currency-mainly dollars-would remain untouched.
Three critical conditions were attached to Globanic's acknowledgment of Peruvian currency. Globanic didn't want cash but instead the debt-to-equity swap, giving it total ownership of two spectacular resort locations now owned by the Peruvian Government. Globanic Financial would develop and eventually operate these, believing both to have gigantic potential as premium holiday destinations. One resort city with a coastal location was foreseen as the "Punta del Este of the Pacific
.”

The other, a mountain-locked site in the Andes, would be a sensational staging point for
excursions to Machu Picchu and Cuzco, among the world's most popular
tourist attractions.
Along with those vast amounts of land would go government guarantees that Globanic could do the developing freely, in its own way. At the same time Globanic would bring in hard currency to pay for development while also creating massive local employment, both helpful to Peru.
The final condition, to be secret between the Peruvian Government and Globanic, was that the price paid for the two resort sites should be twenty-five percent less than their real value.
Globanic would benefit in several ways: Initially by selling the securitized debt for twice what it paid-an instant bonus of $225 million. Next, by obtaining two magnificent locations for only three quarters of their worth. After that, attracting worldwide investment for the resorts' development and eventually reaping gargantuan profits from their operation.

Fossie's report ended with the information that following long and
delicate negotiations, agreement between the Peruvian Government and
Globanic Financial had been reached a few days earlier, with all of
Globanic's demands accepted
.
As K. Phocis Xenos concluded and sat down, there was spontaneous applause
from the small, high-powered audience. Theo Elliott, beaming, inquired
,
"Questions, anyone
?
”

"About those government ministers you spoke of
,”
a CEO named Warren
Graydon began; he headed Empire Chemical Corporation
.”
Is there any kind
of assurance that they'll keep their word
?
”

"Let me handle that one
,”
Elliott said
.”
The answer is yes, we have taken
precautions. But I don't believe we need lay out details, even here
.”

There were subtle smiles, the answer indicating that bribery was
involved. In fact, when the Peru-Globanic agreement was signed and
sealed, the three ministers would receive Swiss bank

accounts, opened in their names, with a million and a half dollars deposited in each. They would also have the free use, whenever required, of luxury condominiums in London, Paris and Geneva, with accompanying fringe benefits. International companies like Globanic Ind
ustries frequently made such ar
rangements for their political friends
.
Margot spoke up
.”
Tell us about Peru's stability, Fossie. Lately there's
been an increase in revolutionary activity, not just in the usual Andes
areas, but in Lima and elsewhere. Under those circumstances will resorts
be practical? Will vacationers want to go there
?
”

She was walking a tightrope, Margot knew. On one hand, because of their
competitive relationship, she could not afford to let Fossie Xenos get away
with his presentation entirely unchallenged; also if something went wrong
with the resort scheme later, she wanted it remembered that she had doubts
in the beginning. On the other hand, if Margot became Globanic Industries'
new chairman, she would need Fossie's friendship and his impressive
contributions to conglomerate revenues. Keeping that in mind, she tried to
make her questions rational and down the middle
.
If Fossie sensed the maneuvering, he showed no sign of it and answered
cheerfully
.”
All my information is that the revolutionary outlook is
short-term and over the long haul Peru will survive with a solid
,
law-abiding democracy favorable to expanded tourism. Supporting that
,
there's a long tradition in the country based on democratic values
.”

Margot made no further contribution but noted that Fossie had just
exhibited a weakness which someday she might exploit. She had observed the
same thing before with others, especially in real estate deals where
glamorous objectives could outweigh normally cautious judgments
.
Psychologists called it the suspension of reality and, as Margot viewed it
,
anyone who believed an end was in sight to armed insurrection in Peru had
done exactly that
.
Of course, she reasoned, the resorts could still go ahead and be protected;
after all, there were an increasing number of places in the world where
holiday-making and danger existed
side by side. But in Peru's case, only time and large expenditures would make the outcome clear
.
Theo Elliott clearly did not share Margot's doubts
.”
If that's all the
questioning
,”
he pronounced, "let me just say this: For some time I've
known what Fossie has just told you, but have brought you into it today
for two good reasons. First, I know all of us can keep secrets and it's
to our advantage to keep this one. Second, I don't want anything to
damage our still delicate relationship with the government of Peru and
thereby spoil what can evolve into the deal of the century
.”