[Chapter 649: No Way Around It]
Most of the purchasers of Firefly's long-term bonds were various pension funds and insurance companies from North America and Europe. These investment institutions primarily focused on maximizing the security of their funds, which made them prominent investors in U.S. Treasury bonds that often offered annual interest rates below 3%.
Although rating agencies assigned a 2A rating to Firefly's long-term bonds, slightly lower than the highest 3A rating for U.S. Treasury bonds, a series of financial data released by Firefly, especially the impending influx of $3 billion in free cash flow, encouraged many industry analysts to express that the safety of Firefly's bond investments was nearly on par with U.S. Treasury bonds. To add to this, Firefly's long-term bonds offered almost double the annual interest rate of 5.5% compared to U.S. Treasury bonds.
In this situation, even without Firefly suddenly abandoning its hand-drawn animation department, leaving the creditor alliance with no leverage, the institutions holding Firefly's long-term bonds had no grounds to request an early bond buyback after Firefly's tough stance. That move would effectively mean cutting off their own financial lifeline.
Thus, while the news of Firefly's anticipated sale of its animation division caused quite a stir in Hollywood and Wall Street, the creditors gathered in Los Angeles found themselves in an awkward position.
As the advocate for the creditor alliance, Ron Perelman returned to New York only to find all his focus consumed by the Marvel situation. Although he knew how to navigate the capital markets with skill, he quickly became overwhelmed in the face of absolute power.
Warren Buffett, Tom Murphy, and David West all had extensive networks and influence in New York, and then there was Katzenberg. A native Manhattanite, he had been part of then-Mayor candidate John Lindsay's campaign team at the young age of 19. A few years later, he had worked as a financial officer to assist Lindsay in his presidential bid. Although that attempt had failed, such a political history was hard for ordinary folks to compete with. Even after years in the media sector, Katzenberg was still seen as a semi-local powerhouse in New York, not to mention he was now poised to become the next CEO of the largest media group in America, which only enhanced his influence.
Under significant pressure from various forces, the efficiency of the New York local court was astonishingly high. Ron Perelman, returning to New York, did not even have the chance to take action before facing a barrage of investigations from law enforcement agencies.
Upon hearing the news of Firefly's decision to sell its animation division, a feeling of dread washed over Ron Perelman. He immediately called Summer Redstone to agree with the terms proposed by Viacom. Perelman sensed that agreeing to Viacom's deal would allow him to swiftly extricate himself from the Marvel maelstrom while securing $100 million in funds. Conversely, if he failed to nail down the deal, he could find himself in serious trouble with Firefly.
However, the sudden turn of events still caught Ron Perelman off guard. The whole of Hollywood was salivating over the 'fresh cabbage' represented by Firefly's animation division, and Viacom was far more eager to snag this 'cabbage' than other major companies. At this time, Summer Redstone would not risk angering Eric for Marvel's 'rotten apple.'
Consequently, despite multiple attempts, Ron Perelman could not get a hold of Redstone himself.
...
At that moment, Malibu's Liberty City estate was hosting a business party.
Two days had passed since Firefly issued a series of announcements and statements. Although Firefly could have completely ignored the stranded creditors in Los Angeles, doing so, while satisfying, would not align with Firefly's long-term interests. Even as a private company, Firefly could not entirely detach from the capital markets, especially considering Eric was developing various industries outside of Firefly. The pension funds and insurance companies spanning across every state in the U.S. and throughout Europe were precisely the primary investors in capital markets.
Therefore, Eric quickly extended an invitation to all creditor representatives to participate in the party at Liberty City under the pretext of "face-to-face communication to resolve differences." By this point, actual communication was hardly needed; guests at the party no longer brought up the creditor alliance at all.
Anyone could clearly see that Firefly was offering them a way out.
Initially worried about facing Eric's haughty demeanor, the creditor representatives arrived at the estate to find that the owner of Firefly Group was not just mature and composed like most of his peers but was also accommodating and engaging. This relaxed everyone greatly. During the subsequent discussions, they gradually forgot Eric's age and unconsciously began to surround him, eagerly discussing various economic and political current events.
"If we pay close attention, we can notice a brand-new information technology industry is rising. While academia has referred to the advancement of cutting-edge technologies like new energy, information technology, space technology, and biotechnology as the third industrial revolution, the truth is that the only industry close to ordinary people's lives is information technology. We all know that the sectors that can be widely popular among the general populace will generate the highest economic value. So in the next ten or even twenty years, mobile communications, personal computers, application software, and the Internet will emerge as the most valuable investment targets," Eric stated confidently, red wine glass in hand, while surrounded by a group of creditor representatives who were also high-level fund managers.
One fund manager dressed in a black suit asked, "Eric, I know you've also invested in high-tech companies like Cisco, Yahoo, and AOL outside of Hollywood, but don't you think the risks in high-tech investments are too great? If I remember correctly, one of the investment philosophies of Firefly's other shareholder, Mr. Warren Buffett, is to avoid high-tech industries as much as possible."
"I wouldn't dare to comment on Warren's investment philosophy, as that could get me buried by his supporters," Eric replied, eliciting a chuckle from the room. "However, in other times, investing in high-tech industries can indeed be very risky. But now, it's different. We are on the brink of an overall industry boom. The field of information technology is vast and covers nearly every aspect of our lives. The semiconductor industry drives personal computers and mobile communications, both of which propel the growth of application software, mobile phones, and the Internet -- all of which together create a massive range of industrial clusters. In this rising trend, investing in high-tech is very secure. I can say with confidence that the North American market, and even the global market, will see a new long-term bull market driven by the developments in the tech sector over the next few years."
Another astute fund manager asked, "Eric, do you think there will be a bubble in this?"
"Of course, every bull market signifies a stock market bubble, and this upcoming industrial explosion will surely mean an even larger bubble," Eric said, his eyes carrying a knowing glint as he surveyed the crowd with a subtle smile. "In a frenzied stock market, even if you hadn't heard my words today, I believe you would still jump in without hesitation. However, whether or not one can restrain their greed to successfully escape in the end -- that depends on everyone's luck."
Seeing that many people had fallen into short contemplation, Eric chose to stop there, deciding it was best to leave a strong impression without saying too much. As he noticed Elisabeth, donned in a light purple gown, smiling from the periphery, he raised his glass and excused himself from the crowd.
...
Eric offered a compliment about Elisabeth's dress, "What brings you here?"
"I've been here for about half an hour," Elisabeth replied, her smile still bright. "I didn't want to interrupt you, seeing how comfortable you were among those older gentlemen."
Eric moved over to a snack table, grabbed a fruit platter, and, finding a spot on a sofa with Elisabeth, smiled back at her words. "It wasn't easy. If I got too close to my peers, the implications would be quite unsavory. I guess you wouldn't want to witness that scene either, right?"
Elisabeth playfully nudged Eric's shoulder. After sipping some red wine, she gradually composed herself and said, "My dad's been regretting something lately."
Eric looked up and asked, "Regretting what?"
Elisabeth shrugged. "That paper media asset from Firefly. My dad said he wishes he had known that it could be bought for just $1.52 billion; News Corp would've definitely made a move."
Eric popped a piece of apple into his mouth and responded, "No worries. That old man's memory is getting worse by the day; he'll forget soon enough."
Elisabeth frowned slightly, "Eric, could you at least show a little respect for my dad?"
"Okay, okay, I'm sorry," Eric replied more solemnly. "So now he definitely wants to buy Disney's animation division, right?"
"Um," Elisabeth nodded. She placed great confidence in Eric's judgment and even admired him. Since he had insisted on downsizing the hand-drawn animation division after The Lion King, she didn't feel as eager about it as other major Hollywood studios did.
However, her dad's opinion was far from aligned with hers.
Eric said, "Let me tell you, Liz, acquiring that paper media asset from Firefly might yield decent profits over the next few years. But buying the hand-drawn animation division just won't be profitable."
Elisabeth shot Eric a look, "What good is that advice for me? You need to talk to my dad about it."
"I'm not obliged to, but just this once, don't get involved," Eric thought for a moment and added, "Even if your dad goes all out, I doubt he'll get it this time."
Elisabeth inquired curiously, "Oh? Which company do you think is most likely to acquire the animation division?"
Recalling some materials Kelly had gathered in the past few days, Eric responded, "I think Warner Bros. is the most likely. Their film business this summer was terribly weak. If Terry Semel doesn't deliver impressive results to the board and shareholders soon, he might not stay in the CEO position for long. Then there's Paramount; I heard they plan to use Blockbuster to mimic Disney's merchandising strategy."
Eric smiled with a touch of schadenfreude, "With over 3,000 Blockbuster locations in America, that's more than six times the number of Disney stores worldwide. It's a really good idea, but Paramount doesn't have many films to develop in terms of merchandise. It's funny when I think about it. Ha! Sorry, just had to laugh a little."
Elisabeth rolled her eyes slightly, waiting for Eric to finish. When his laughter subsided, she said, "I thought you'd think Universal was the most likely; after all, Michael Eisner used to be Disney's CEO."
Eric shrugged, "Forget about Universal and Columbia. Michael Eisner would definitely want the animation division, but he doesn't have enough power now; both Universal and Columbia are in the hands of the Japanese. The Japanese can be generous at times, but they can also be extremely tight-fisted. Their anime industry is highly developed, and while they won't look down on Hollywood's animation studios, they won't be eager to spend over $1 billion to buy a hand-drawn animation division. Lastly, MGM doesn't stand a chance either. As for you guys, I believe News Corp's current focus remains on the television network; they probably won't be as reckless as Warner Bros. or Paramount."
Elisabeth slightly nodded, acknowledging that Eric's analysis was sound.
Since Firefly acquired ABC and no longer cooperated with the Fox network, News Corp had channeled most of its energy into the operation of the television network this year, even going so far as to significantly reduce film production once more.
Resolved not to attempt influencing her father's decisions any longer, Elisabeth relaxed and asked, "So, haven't you been trying to acquire that comic company lately? Which superhero copyright are you eyeing?"
"There are quite a few: Spider-Man, the Fantastic Four, the Hulk, Iron Man, and so on. Actually, I'm a comic book fan; did you notice that?" Eric replied.
Elisabeth shot him a dubious glare, "You're just talking nonsense. I've never seen you reading a comic book!"
Eric chuckled, "That just means we need to get to know each other better."
*****
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