"I come here with good intentions today, Barron."
Colin Hall says:
"It's just to solve some of your troubles."
"trouble?"
Barron looked at the other person with a hint of doubt and asked.
"Yes, I know that the bank you cooperate with most is Barclays Bank, and you also have some cooperation with Goldman Sachs."
"Originally, your North Rock Bank also had a chance. I once showed my goodwill, Colin, but unfortunately, you rejected me."
Hearing Barron's words, Colin Hall shrugged and said,
"I also know about this matter. It was a problem with Burris, the former head of credit at Northrock Bank. He made a bad decision..."
"Sometimes it's like this, Colin. I trust people who help when they need it more than those who add icing on the cake."
"That's because I wasn't in London at the time, and now I'm here to repair our relationship."
Seeing Barron looking at him and motioning him to continue, Colin Hall said sincerely,
"I have studied the current liabilities of your DS Capital and found that there are a huge number of bank loans, mainly from Barclays Bank and Goldman Sachs Group. The interest rates of these loans are very high, higher than 12%. I know that these loans came from some leveraged buyouts you carried out. At that time, the EU's bank loan base rate was as high as 5%. Such financing interest is normal for leveraged buyouts..."
"But now the EU's bank loan base rate is already below 3%, and even in the United States, this figure has remained at 1% for several months... Under such circumstances, the interest rates on your loans are too high..."
Barron admitted that what Colin Hall said was right. In the beginning, Barron used leveraged buyouts for acquisitions including O2, Manchester United and Argos. He paid part of his own funds and raised the rest from Barclays Bank and Goldman Sachs. The interest rates of these financings were very high, many of which exceeded 12%...
Of course, compared with the future value growth of these acquisition targets, Barron can afford these slightly high financing costs when he thinks he can get them when the price is lower, or at a more appropriate time.
However, he later tried his best to find ways to reduce the cost of financing.
For example, O2 Telecom raised 2 billion pounds through two issuances of corporate bonds and has repaid part of its debt ahead of schedule.
Manchester United and Argos have each issued £500 million of corporate bonds and have repaid the financing they raised when acquiring them.
However, up to now, Barron still has to bear the high-cost financing of 3 billion pounds for O2 Telecom's debt with an interest rate of more than 12%.
This means that the interest on these debts will be as high as 360 million pounds each year. Combined with the interest on other corporate bonds, the annual interest will still exceed 460 million pounds, which is still a very high burden.
Although Barron has made a lot of profit from this foreign exchange transaction of EUR/USD, even after completing the acquisition of 100% of SLEC's shares, he still has more than 2.15 billion pounds in his account, but about 400 million pounds of funds are needed to pay interest on the financing of his previous leveraged transactions...
Before meeting Colin Hall today, Barron was also prepared to cover the current £3 billion of high-cost financing with new lower-interest loans or corporate bonds.
After all, the EU's benchmark bank loan interest rate was already below 3% at this time, and for a period of time, it had reached a low of 2.5%, which was already half of the 5% he paid when he was raising funds...
This means that current bank loan interest rates are much lower than they were back then. Using new low-interest loans to cover high-cost loans is a measure that is often used to reduce loan burdens after leveraged buyouts.
Therefore, after hearing what Colin Hall said, Barron had roughly guessed what he meant. He said,
"So? Colin, what are your plans?"
"I said that I hope to re-establish our friendship, Barron. You know that our Northern Rock Bank is also quite strong. We can provide you with a loan with an interest rate limited to the current basic bank loan rate. Of course, this is definitely a mortgage loan. You need to use your O2 Telecom shares as collateral. However, the process is very relaxed. We can help you repay the remaining loans first, and then mortgage the shares to us."
If it is as Colin Hall said, then with the current bank loan base rate of slightly more than 2.5%, the loan cost they provide is even lower than the 3.5% interest rate of his corporate bonds, which is still very suitable, but the problem is...
Barron asked:
"This is an option that can be considered, Colin, but what I am concerned about is, how much loan can you provide? In addition, what is the proportion of O2 Telecom shares that I need to mortgage? And also, your loan term. After all, you know that you have a precedent of early loan repayment, so I have to be cautious."
Colin Hall knew that what Barron meant by early repayment of the loan was that when the Devonshire family encountered a financial crisis, Northrock Bank had urged them to repay the loan before it was due.
He explained:
"I also know about the previous incident. To be honest, Northern Rock Bank was indeed worried about the repayment of the loan before it was due, so it disturbed us in advance. We need to apologize for this, but it was you who proposed to repay the loan in advance, and we also waived the interest for the loan period. Of course, I can guarantee that this will not happen again."
"We can provide you with a loan of 3 billion pounds to repay the high-interest financing from Barclays Bank and Goldman Sachs Group. The term can be up to 5 years. The interest rate is like what I told you, because it is a mortgage loan, the interest rate will be within 3%. Well, I can give you 2.8% interest..."
"As for the proportion of O2 Telecom shares that need to be pledged, I know that you previously pledged all of O2 Telecom's shares to Barclays Bank and Goldman Sachs for a total of 5 billion pounds of financing. Based on this calculation, the proportion of O2 Telecom shares that we need to pledge should be 60%, which also corresponds to the pledged share of Barclays Bank and Goldman Sachs for the 3 billion pounds of financing."
Hearing Colin Hall's words, Barron couldn't help but sigh that in this era of low interest rates, the interest rates on loans are really tempting. You know, before he was reborn, Barron was also exposed to a lot of related businesses. At that time, because the increase in the UK Consumer Price Index (CPI) was higher than expected, bond yields climbed, causing the market's bet on the peak of the benchmark interest rate to rise from the previous 5% to 6.5%, which in turn pushed up the fixed mortgage rate accordingly, reaching 6.7%.
Compared with now, it can be said to be heaven and earth.
"I can consider all of these. The only thing is that the current situation is different from that time. As you can see, O2 Telecom is developing well. The number of users of this company is now more than twice that of when I bought it. It has also been very successful in market development in Germany and France. Therefore, the current valuation of O2 Telecom is at least twice that of the original one. As for the mortgage of this 3 billion pound loan, 60% of the shares is definitely something I cannot accept."
Hearing Barron's question about the proportion of mortgaged shares, Colin Hall smiled and said:
"But don't forget Barron. The interest rate of the loan we give you is already very low, so we need to have some collateral. And if it is a long-term loan, we need to be more cautious because we cannot predict the future business conditions. We can only make relatively pessimistic preparations."