No. 217, let's hurt each other

Wei Dongsheng did not continue the topic, and the topic suddenly returned to the initial interest negotiation: "I have two acquisition plans. ”

Fulderton focused his attention: "Please speak." ”

Wei Dongsheng: "The first plan is to acquire a 30% stake in Lehman Brothers for $12 billion; The second option is to buy a 40% stake in Lehman Brothers for $16 billion. ”

Fuld froze.

Wei Dongsheng's offer was incredibly good, valuing Lehman Brothers at $40 billion in either way.

A few days ago, Treasury Secretary Paulson's attitude was not resolute, AIG was not yet at risk of collapse, and Lehman Brothers still had hope of being bailed out by the government, so Korea Development Bank was willing to value Lehman Brothers at $24 billion and wanted to buy a 25% stake in Lehman Brothers for $6 billion. At that time, Fuld felt that the Korean Development Bank's offer was too low, and he could expect to hold Barclays Bank and Bank of America in the United Kingdom, so he simply and rudely rejected the negotiation of the Korean Development Bank.

As for the Rose Fund, Fuld is even less impressed. The Rose Fund is priced slightly higher than Korea Development Bank, valuing Lehman Brothers at $25 billion, but it always drags on the details. The Lehman Brothers negotiation room has become a playground for the Rose Fund's negotiation team, even less reliable than the Korea Development Bank. Fuld didn't know that Gong Qiuqiu's offer of $25 billion for Lehman Brothers was a mockery of him, otherwise Fuld would have angrily rejected the deal.

Due to the AIG variable, Lehman Brothers came to the brink of bankruptcy on September 14.

Lehman Brothers had no way out.

In Fuld's imagination, the Rose Fund should have opened its mouth and taken the opportunity to acquire more equity with less money. Unexpectedly, Wei Dongsheng not only did not bring the momentum to reduce the price, but generously raised the valuation to $40 billion.

This was very unexpected.

Fuld believes that Lehman Brothers is worth $50 billion, and offers below $50 billion are all about cutting meat. It's a pity that at this moment in time, it is very rare for Wei Dongsheng to value Lehman Brothers at $40 billion on the verge of bankruptcy at this moment. Except for the generous Wei Dongsheng, no one will value Lehman Brothers at another $40 billion. Considering Lehman Brothers' urgent need for cash flow, Fuld reluctantly ceded more equity: "I chose the second option. ”

Wei Dongsheng: "Don't you question whether I have $16 billion?" ”

Fuld changed color in horror: "What do you mean? ”

Wei Dongsheng: "The Rose Fund started with about $2 billion, and then intermittently attracted $8 billion in high-end customers, even so, the total principal of the Rose Fund was only $10 billion. Although there is a lot of paper profit from shorting the mortgage market, a large amount of the money is used to ensure the performance of the short contract, and only a maximum of $4 billion in cash can be withdrawn at present. ”

Fulder's gaze suddenly sharpened: "$4 billion can't save Lehman Brothers." ”

Financial institutions are funded by short-term deposits, and lent out by long-term loans. Taking a mortgage as an example, the owner borrows money from the bank to get the house, and the bank pays the full amount of the purchase price to the developer, and then the owner pays the mortgage to the bank every month. The mortgage loan lent by the bank is the net asset of the bank, the principal of the owner's mortgage is the bank's assets, and the owner's mortgage interest is the bank's profit. However, if the owner suddenly runs out of money and can no longer pay the subsequent mortgage, the mortgage previously lent by the bank will become a bad debt, and the securities composed of the mortgage will be worthless in an instant.

Lehman Brothers' fixed assets are actually very substantial, which is why Fuld is reluctant to sell them cheaply. Lehman Brothers' so-called insolvency is the result of the undervaluation of all its bond holdings in the context of the economic crisis, and the losses caused by excessive leverage far exceed liquidity. If Lehman Brothers had sufficient cash to cover the losses on capital write-downs and the housing market recovered, all problems would no longer be a problem.

Lehman Brothers needs cash, and it only needs cash.

Lehman Brothers needs a lot of cash.

A mere $4 billion is a drop in the bucket.

Wei Dongsheng ignored Fuld's question: "I won't give you $4 billion." ”

Fuld lost his smile for an instant: "So, you're here to find me happy?" ”

Wei Dongsheng motioned to Gong Qiuqiu to hand Fuld a contract: "Merrill Lynch owes $3 billion to the Rose Fund, and our Rose Fund can transfer Lehman Brothers for $2.4 billion." Of the $2.4 billion, $600 million went back to the Rose Fund and $1.8 billion was used to acquire shares in Lehman Brothers. In other words, Lehman Brothers could get $600 million in profits and $1.8 billion in financing from the $3 billion contract. ”

Fuld softened: "This contract isn't worth $3 billion. ”

Wei Dongsheng told the truth: "In the hands of the Rose Fund, it is indeed not worth $3 billion. In fact, Bank of America and Merrill Lynch are asking Rose Fund to discount the contract to $300 million in the name of asset restructuring. There is no way for the Rose Fund to take Bank of America and Merrill Lynch, but I believe that Lehman Brothers has a way, and you have the ability to restore the contract to its original value. ”

Fuld was reluctant to show what he was capable of: "Yes, I can. If this contract is in the hands of Lehman Brothers, I will be able to get Bank of America to come up with $3 billion tomorrow. ”

Wei Dongsheng said with a smile: "Bank of America and Merrill Lynch pushed Lehman Brothers into the abyss, and Bank of America and Merrill Lynch wanted to ignore the spirit of the contract and rely on the $3 billion of the Rose Fund. We all have enmity against them, so why don't we unite against them? ”

Fuld clutched the copy of the contract in his right hand, and stared at Wei Dongsheng with burning eyes: "How many such contracts does the Rose Fund have?" ”

In the negotiation room, Gong Qiuqiu handed Fuld one contract after another: "This contract is for Bank of America, $3 billion; The contract is for JPMorgan Chase, $2 billion; The contract is for Goldman Sachs, $5 billion; The contract is for Morgan Stanley, $3 billion...... All the well-known financial institutions on Wall Street owe us money. ”

Flipping through one contract after another, Fuld's eyes grew brighter and brighter.

More than ten minutes later, Fuld raised the price: "Seven percent off, Lehman Brothers seven percent off all short contracts." ”

Bank of America, JPMorgan Chase, Merrill Lynch, Goldman Sachs, and Morgan Stanley have tacitly joined forces to resist the short selling of the Rose Fund, with almost all contracts being pushed down to one-tenth to two-tenths. In this context, it is profitable to resell it to Lehman Brothers in three folds, let alone seven folds? Wei Dongsheng immediately nodded: "Yes." ”

Fuld raised the price again: "Rose Fund buys 30% of Lehman Brothers at a valuation of $50 billion. ”

Wei Dongsheng couldn't let Fuld be too presumptuous, so he sniped decisively: "40%." ”

Fuld insisted: "30 percent. ”

Wei Dongsheng was too lazy to cut the price of vegetables with Fuld: "40%, otherwise I will cancel the negotiation." ”

Fuld picked up the contract in his hand: "Are you willing?" ”

Wei Dongsheng shook his head: "The question is not whether I am willing or not, nor is it 30% or 40%, let alone the valuation of $40 billion or $50 billion, but your attitude makes me feel insincere." Lehman Brothers is no kinder than Merrill Lynch, and you were also unwilling to pay the original price for the short contract of Lehman Brothers by the Rose Fund. If your character is not trustworthy, when Lehman Brothers survives the crisis, it will definitely be another dispute. ”

Fuld decisively stopped raising the price: "Please trust the credibility of Lehman Brothers. ”

Wei Dongsheng: "Credibility is made, not spoken, and your condescending performance makes me feel no sincerity." ”

Fuld shifted to sincerity: "But 40 percent is too much. ”

Wei Dongsheng put forward a new condition: "The Rose Fund does not pursue convertible equity, and it will not be included in the total share capital of Lehman Brothers before maturity, and it does not have to be forcibly converted into shares after maturity." ”

Fuld pondered for tens of seconds and gave the answer: "Good! ”

In this way, on the surface, the Rose Fund acquired a 40% stake in Lehman Brothers for $20 billion, but in fact, it dumped a precise short contract that could not be fully realized to Lehman Brothers. However, these contracts will only be liquidated in the coming months, and the crisis of Lehman Brothers' broken capital chain will not be eliminated in the short term. In order for the Lehman Brothers ship to continue to operate, Fuld must find new sources of funding as soon as possible to resolve the impending crisis of tomorrow.

That's not a problem, though. In order to avoid the collapse of Lehman Brothers' business after its bankruptcy, Lehman Brothers' brokerage and trading division is not covered by the bankruptcy filing. The Fed had hoped that the sector would continue to exist, even if only for a few days, so it had $45.5 billion ready for it through a special lending channel to investment banks. Lehman Brothers was able to use the funds for temporary turnover, so that with a recent flow of $45.5 billion in funds, and a long-term short-selling contract financing of the Rose Fund, Lehman Brothers' management gradually gained a glimmer of confidence in the future.

Of course, this is not enough.

In order to avoid a plunge in the stock price after the market opens tomorrow, Lehman Brothers needs more positive news.

Through Fulder's channels, Wei Dongsheng urgently contacted U.S. Treasury Secretary Paulson. Paulson was burnt out, his eyes bloodshot from exhaustion. As soon as Wei Dongsheng was full of commercial smiles, Paulson had already urgently asked Wei Dongsheng for confirmation: "The Rose Fund has decided to invest $20 billion to acquire Lehman Brothers? ”

Despite the fact that all the so-called financing sources are short contracts, Wei Dongsheng still boasted of actively participating in the bailout: "At the opening ceremony of the Olympic Games, I promised you that the Rose Fund is not short for the sake of shorting, and will definitely cooperate with the US government to rescue the market." I have always been true to my word, saying that if I cooperate with the US government to bail out the market, I will cooperate with the US government to bail out the market. ”

Paulson grinned, "That's the only piece of good news I've heard today." ”

Paulson immediately laughed at himself: "With the Rose Fund buying Lehman Brothers, public opinion should no longer say that I will continue to serve Goldman Sachs in the position of Treasury Secretary." ”

Wei Dongsheng smiled and politely exchanged a few words with Paulson, and then made his intentions clear: "The Rose Fund has fulfilled its promises, should Wall Street also show goodwill to the Rose Fund?" ”