by Alex Cugia
Herren looked unperturbed. “I see that Mr Ryan has followed my suggestion. Giving Ryan a seat will reassure Morgan Grenfell employees that this is an integration, not a takeover. And if Morgan doesn’t get the results we expect they won’t be able to put the blame on us.”
Herren’s cunning and skill in reaching his objectives again impressed Stephan. Had Herren proposed bringing Ryan on to the board the other members would almost certainly have blocked it. But by having Ryan present it as a fundamental point in the acquisition negotiations he ensured that the proposal would be accepted, albeit reluctantly, by his co-directors.
Herren glanced quickly over the papers. “Yes, everything seems to be here. If I have any questions I’ll call you. We need to complete within a week but I feel that Mr Ryan is ready to sign.” he said, with the calm confidence which could still surprise Stephan. The competing bid from the French Societé Générale didn’t seem to worry him in the least.
“But there’s another matter I want to tell you about, a new project I want you to start working on immediately. It’s extremely confidential. Extremely confidential.” He paused and looked intently at Stephan. “We are about to launch our first Euroloan programme for the Soviet Union. Fifteen billion Deutsche Marks.”
“Fifteen billion!” Stephan could hardly contain his amazement. “The Soviet Union?”
“Exactly.”
“Have they done deals of this kind before? Any documentation I can go through to find ... ”
“There have been some small issues, in the millions, through some agency but this will be their first time accessing Western capital markets at anything like this level. That’s what makes this project so interesting. You’ll learn a lot from it, I’m sure of that.” The board meeting was about to start and Herren got up to leave.
“But do you think the markets would take that kind of credit without some form of guarantee?” Stephan tried his best to sound positive as he rose and walked to the door. He knew from experience that Herren hated to be contradicted. But the idea made no sense whatsoever unless some entity like the World Bank or the IFC guaranteed the loan. The risk of a country like the USSR defaulting on the loan was too high to attract investors, whatever the interest rate put on the paper.
“You’re right. Soviet paper would be unsellable without some guarantee. That’s why the Federal Republic of West Germany has agreed to provide that reassurance.”
Herren was looking at him calmly, the hint of a smile about to break out, enjoying Stephan’s astonishment and discomfiture.
“You will be working on the documentation with senior members of the Ministry of Finance. The first meeting is scheduled for tomorrow at nine. You should … ”
The phone ringing interrupted him.
“We’ll speak further after the board meeting.” He waved Stephan out of the office, turning on the speaker phone. Stephan heard “The Chancellor is on the line for you, Mr Herren.” as he closed the door with care.
Stephan slowly returned to his office, collecting coffee on the way. He’d been working non-stop for the past five months on the Morgan Grenfell acquisition and had been looking forward to some breathing space and time for a social life. Camille would be furious at this new load on him. And the first meeting was tomorrow. God, let it not interfere with this coming weekend in Berlin with Thomas, he thought. Even at the speed that Stephan drove it was still a five hour trip and he’d arranged to collect Camille from their apartment at midday. Well, she wouldn't like it, but at least she was used to his being late. Surely the meeting would be over by half past twelve at the latest.
Not that he was wild about listening to opera – he took some pride in describing himself as having Van Gogh’s ear for music—but he desperately wanted time away from work and he knew how much Camille was looking forward to the trip as she’d never been to Berlin. He and Thomas had spoken yesterday to finalise details and he’d learned of some feisty new woman that Thomas had just met and was hoping to get to know better. As for the opera - “Best seats in the house!” Thomas had said – it might turn out better than he feared and in any case he knew how much music meant to his friend. They deserved this weekend, he thought, and he was looking forward to it.
*
Anxious about being punctual the following day Stephan had set two alarm clocks, placing the more insistent one on top of his wardrobe, out of easy reach. Of course he’d then slept badly, his mind racing with thoughts about what he might have overlooked in his preparations or what might go wrong during the meeting itself or how long it would go on for. After tossing and turning and peering blearily at the time every hour or so, desperately afraid he was now going to sleep through when he needed to be up, he finally abandoned his futile attempts and rose at 6.15, a good half hour before he needed to. It was always the same when he started a new deal or had an important meeting, he thought crossly, as he yawned and made himself some strong coffee.
Herren dealt only with the top echelon of business and political figures and that meant that Stephan, as his assistant, had to work hard to be respected. He was conscious that that he didn’t always make a strong enough first impression, that these powerful men disdained him to some extent. Perhaps I need to be more arrogant, more opinionated, he thought; I may come to be less liked but they’ll listen to me and what’s more important they’ll remember me. He struck a pose and growled at his reflection in the bathroom mirror. At least his teeth and his skin were good, he thought.
The meeting was to be held at the offices of Gottlieb Chance, the law firm founded in Frankfurt fifty years earlier and which had risen to become immensely powerful in its work within the financial sector. It was hardly known outside this specialist area and its partners worked hard to ensure that that situation continued. Its discretion was legendary and it was that, coupled with its reputation for reliability and a wide ranging understanding of law and finance, which had brought it to its current dominant position. If you were unsure about legal precedents and perhaps consequent implications relating to some arcane financial instrument or transaction or policy you could be certain that a Gottlieb Chance partner would know the answer.
The receptionist summoned an assistant who accompanied Stephan in the lift and showed him to the large meeting room at the very top of the building. The entire outer wall of this room was lightly smoked glass and gave Stephan, from his position on the forty fifth floor, a breathtaking view of Frankfurt. To his left he could see the Main curving away in both directions and an old building he decided must be St Bartholomew’s Cathedral, a large 18th century etching of which hung on the wall to his right. Hanging beside it was a Merian engraving of Frankfurt with the same church centrally placed while several other engravings or etchings of Hesse and old urban or village views of the Main and the Rhein decorated the other walls.
Stephan was the first to arrive and as the assistant left him he tried the door through which they’d entered, the only one in the room, finding without surprise that it was locked. Gottlieb Chance deserved its reputation as a consummately professional firm, he thought. Sitting down at the massive oval mahogany table which dominated the room he skimmed through some documents on earlier Euroloan deals he’d found in the Deutsche Bank library. As he'd expected there was almost nothing there of much interest; there were no useful Soviet economic figures, nothing on the USSR Central Bank’s currency or gold reserves. He’d have to be very alert during this meeting and learn as it progressed.
The door opened and Weigel, the German Finance Minister, closely followed by Herren and six other formally suited men entered. Everyone was in their late fifties or older, Stephan noted apprehensively.
“Weigel looks even more impressive than he does on television!” Stephan thought noting that even his enormous black eyebrows, looking almost like moustaches transplanted to above his eyes, appeared different and gave him additional gravity. Herren greeted Stephan, shook hands, introduced him to Weigel, and then to the others. Apart from two Finance Ministry off
icials there were a couple of senior Bundesbank officials and two Gottlieb Chance partners - Erich von Hesswald, the senior partner, and a colleague, a specialist in Eastern and Central European finance.
Weigel briskly called the meeting to order, surprising Stephan who had expected representatives of the Soviet government to be present. They were, after all, the party seeking the loan and so responsible for repaying it.
“Gentlemean, you will all be aware that this is the first time that the Soviet Union has sought to access Western capital markets in any significant manner. We therefore thought it important to be here today to underline our government’s commitment to this project. The Central Committee of the USSR has been implementing radical reforms, perestroika, in response to the policy of glasnost introduced by Mr Gorbachev. We believe these reforms are desirable and will bring about dramatic changes, changes which will be evident not only in the Soviet Union itself but also in its relations with other countries, including our own. There is still internal resistance to Mr Gorbachev’s reforms, however, and Chancellor Kohl believes that Mr Gorbachev is risking a great deal and should be supported in facilitating a structural shift towards a more democratic and more open Soviet Union. This demands finance and as German Finance Minister I am in complete agreement with the Chancellor on these various matters.”
He paused, took a long sip of water from the glass on his left, and looked slowly round the room at all those present. Feeling out of place in the company in which he now found himself Stephan felt a powerful urge to look down as Weigel paused and looked at him curiously. Meeting and holding the Minister's gaze with an effort of will Stephan recognised the authority others spoke of and with which he dominated the Bundestag during discussions on finance and the economy. Weigel nodded slightly and moved his gaze to the next man and resumed his comment.
“It’s for these reasons that Chancellor Kohl has decided that we must provide a guarantee on these loans. I repeat, I am in entire agreement with the Chancellor on this point. The close personal friendship and mutual trust which has developed between Chancellor Kohl and Secretary Gorbachev is shown by their request that we negotiate the terms and conditions of this financing on their behalf. Dr Herren, would you kindly expand on this.”
“Thank you.” said Herren, barely glancing at Weigel but focusing on a document he had placed in front of him. “The Ministry of Finance and the Bundesbank will in this instance be representing both the issuer, the USSR, and the guarantor of the loans, the West German government. This is largely because the Soviet Central Bank officials lack experience in such matters.”
Stephan listened attentively to Herren’s words but his mind kept buzzing with questions. There was a structural conflict between the issuer and the guarantor. Each wanted the other’s responsibilities under the loan to be as great as possible, to minimise their own. It made no conventional sense whatsoever that the German authorities were covering both roles.
“In total we expect to finance something of the order of fifty billion Deutsche Marks.” Herren continued. “We will break up the financing into a series of smaller elements, placed through different instruments and having different maturities. We would like our group here to draw up a munster, a complete set of documentation which will then be adapted for each issue. We will present the credit initially through a Euroloan for fifteen billion DM, wholly underwritten by Deutsche Bank, and we would expect to close this first deal by the end of October."
The oldest person in the room was clearly von Hesswald and although he looked frail, his white hair shining brightly in the cone of light from one of the halogen lamps, Stephan saw that his eyes were attentive and alert.
“Dr Herren, forgive me, but I have a question on the structure of the transactions. I’m not sure whether this is a question for you or rather for the Finance Minister. I believe a difficulty in presenting this opportunity to investors will derive from the fact that the Soviet Union is essentially a self-contained economic system. There is very limited financial interface with the West and therefore the USSR has in turn very limited access to foreign currency and very few reserves so denominated. This will make it difficult for them to repay a loan denominated in a hard currency – unless, perhaps, we have title to some suitably valuable and accessible asset, their oil or gas reserves, for example. Are you thinking of securing privileged access to some valuable assets, or are we looking at a very strong guarantee from the West German government? I believe these can be the only alternatives if we want to get the deal placed successfully.”
Herren and Weigel glanced at each other. The Finance Minister looked around the room for some seconds before answering. Stephan thought he detected uneasiness and a hint of tension behind the conversational tone in which Weigel replied. “No, there will be no form of privileged access to Soviet assets. At the request of the lead manager, Deutsche Bank, the German government will provide investors with a pass-through guarantee.”
Von Hesswald nodded his head slowly in assent. “Then I guess that potential problem is solved.”
Stephan looked at Herren and then at Weigel, trying to make sense of what had just been said. A pass-through guarantee was the strongest form of loan guarantee possible and meant that investors would have immediate and total recourse to the guarantor in the event of any failure. For all practical purposes it was as if the loan liability were being issued by the German government itself. No wonder no Soviet Union officials were at the meeting – their presence was completely irrelevant.
Chapter 6
Friday September 15 1989
THOMAS slowly drifted into consciousness from some deep pit, struggling painfully out so that he increasingly came to regret leaving his former stupor. A fierce, throbbing pain towards the back of his head grew and pulsated as his senses returned. His forehead ached and as he gingerly explored he found a large bump and what he took to be dried blood just above his right eye. His nose felt tender and swollen and he could breathe only through his mouth which was now dry and rancid, his lips cracked.
He was in darkness, lying on what seemed to be a concrete floor, his left leg twisted under him and his right at an odd and uncomfortable angle. The air felt damp, stagnant and heavy. There was a sour, musty smell overlaid with a sharp, ammonia tang which brought back to him the lavatories with its old splashed cement floor in a run-down pub he’d sometimes visited in Frankfurt when Olga was absent. His ears buzzed with the oppressive silence. He screamed in frustration but all he could manage was a moaning croak and when the meagre echoes had died the silence was worse.
He tried to stand up but his right knee gave way with a stab of pain and he lay on the stone while he recovered. The skhin below his knee felt raw and tender and the leg of his jeans was stiff and crusted with something. His right shoulder down to the middle of his chest felt bruised and painful. Half hopping on his left knee and his arms, dragging his right leg behind him and shuddering when that knee took inadvertent weight, he explored his surroundings.
There was a smooth, solid metal door with a small rectangular flap near the base but with no sign of any keyhole or catch. The fit with the metal frame was complete and only by sliding a fingernail could he detect any crack. He pushed at the flap and although it gave slightly it seemed to be blocked, presumably capable of being opened only from outside.
The wall was rough, apparently made of breeze blocks, and the ceiling, which he could just brush with his fingers when he’d hauled himself painfully upright, seemed to be of similar construction. Above the door there was a small grill and later on he discovered a second on the facing wall, this one carrying a slightly cooler, faint, waft of sweeter air. On that wall he also found a small basin with one tap, cold, and beside it a steel lavatory pan with no seat. He splashed his face with water and drank some from his cupped hands, wincing at the cold and at how the water stung bits of raw flesh.
Feeling his way to the fourth wall he swore as he banged into something angular and hard and jarred his right leg in recoil,
sending a Roman candle of pain flashing behind his eyes. This was an iron bed frame, bolted to the wall, covered with a thin mattress and a coarse wool blanket, a lumpy pillow at the end. Shivering, he dragged himself under the blanket and tried to make sense of what had happened. Where the hell was he? And why was he there anyway?
At first he got nowhere. He’d clearly lost consciousness, but how and when? He had a vague memory of a car but if he’d been injured then why was he not in some hospital? Why was he not being cared for properly? Why had he been flung into this place, with no regard for his injuries, like some expendable animal? He tried hard to remember what had happened but could make little sense of the confused and disjointed memories. There was something about someone shooting, but that made no sense. By habit he glanced at his wrist but saw no familiar phosphorus gleam and when he felt for his watch found nothing.
Then with a jolt of pleasure he remembered his dinner with Bettina. He remembered their tender parting by the bridge and for a few moments almost forgot his pain and his surroundings as he relived the experience. Disconnected scenes started to drift into his mind, coalescing into some sort of order - the sullen walk to the car, his earlier argument with Mark, the attempted escape, the men who had shouted. He remembered Mark’s lunatic driving as they took off but then nothing, hard as he tried. They must have crashed, he thought, and quite badly judging by his injuries.
This must be a cell, and the people who had challenged and pursued them must have been Vopo agents or, worse, from the Stasi, the secret police. Had he exchanged money with Mark? He couldn’t remember exactly but whether he had or hadn’t didn’t really matter given the amount of currency he’d had. That it was DM or Ost Marks was irrelevant - it would be obvious what he and Mark been doing. There was no way he could pretend that he was an innocent tourist. He was clearly facing a lengthy prison sentence. Butthe one thing that still bothered him why was he not in an ordinary police cell? Why was no one around? And what time was it?
