by John LeFevre
The summer in London is essentially just a handful of nice days a year. By comparison, Hong Kong is a tropical island. Having failed to do any meaningful due diligence, I do not realize that I have arrived in the middle of the rainy typhoon season. As my luck would have it, a storm has just blown through town, taking with it all the pollution and humidity, leaving clear blue skies and a gentle island breeze. I just assume this is how it is all the time.
My first order of business is to head down to the pool, with its palm trees, sweeping views of Victoria Harbor, and extravagant seafood buffet. This is my first experience with the service-orientated nature of Asian hospitality—and it’s fucking fantastic. Before I even realize that I want another drink, there’s a guy pouring one for me. Every time I make a trip back to the buffet line, some lackey is waiting at my table with a fresh ramekin of melted butter just in case I decided to pick up another lobster tail—which of course I do.
I have been in Hong Kong for all of two hours, but as far as urban financial hubs go, this is paradise—blue skies, a poolside seafood buffet at a five-star hotel overlooking a harbor of boats zipping by with electrifying purpose.
I don’t take off my bathrobe or swim trunks for the entire weekend, other than a quick trip to pick up a new Blancpain and to meet a friend from college for drinks in Lan Kwai Fong, or LKF, Hong Kong’s famous gweilo-orientated dining and drinking district.
If I move at all, it’s just to get from the pool area to the spa area, where my first order of business is to dial up the trifecta—simultaneous pedicure, manicure, and face and scalp massage. Later that day, I take it up a notch with the one-hundred-minute “four hands” full body massage. It’s sensory overload. The next day, after too many cocktails and too much sun, I sleep through my entire massage. Good thing there’s a pretty easy solution for that. When they wake me up, I just tell them to start over.
I am hooked. I don’t even need to see the office or meet the people. But of course, I can’t just say that. People will question my judgment and my priorities if I flippantly decide to throw my career on a completely different track and move around the world on the basis of two days in a hotel. I need the firm to think that I am doing them a huge favor and making a sacrifice by moving.
My uneventful day in the Hong Kong office is simply a box-ticking exercise. I’m heading back to London without really having sought the answers to many of the questions I came with, but I don’t really care. Hong Kong is an exotic seductress.
I call Paul from the airport. “Well, it’s a long way from my family. I have a girlfriend, and as you know, we have been thinking about moving to New York. I’m just not so sure that this is the right move for me.”
“What the fuck? Call you back.” Click. I’m not too alarmed. On the trading floor, rules of etiquette are completely different. It’s not at all uncommon for someone to hang up on you and mean nothing by it.
I check in with British Airways and breeze through immigration. I have just enough time to have some food and try to get drunk in the lounge, grab a forty-five-minute massage, and then peruse the terminal for a thoughtless gift for my girlfriend back in London—I know now there’s no real point in investing further in the relationship.
As I’m paying for the cheapest Hermès H bracelet I can find, my phone rings. It’s Paul. I continue to play my bluff. “Well, I’m in the airport. Gotta tell you. It looks great in terms of career, but personally, I just don’t know about being so far away from my family, not to mention the issue of my girlfriend. And living in China.”
“Don’t be a pussy. It’s Hong Kong, not China. And chicks there love white dudes with cash.”
Even though I’m sold on the move, I want them to sweat it out a little bit. One of the things I have learned is that if the firm thinks they’re doing me a favor, then I’m totally fucked. As long as it looks like I’m making the sacrifices, then hopefully, they will take better care of me at bonus time.
“I hear you, but . . .” I try to ease the conversation into an agreement with one last feign of reluctance.
“But what? What the fuck? Do me a favor before you get on the plane. Go to a newsagent and buy a stack of Asian porn. Learn to love it, baby. You can find yourself five new girlfriends.” And that was it.
The Hong Kong to London flight has to be one of the best trips in the world. You can have dinner, plenty of drinks, and even a massage before getting on a midnight flight. And then you can have a few more drinks, watch an entire movie, and then pass out for ten-plus hours. Next thing you know, it’s 5 a.m. in London, and you wake up feeling well rested and refreshed.
I stop at Starbucks on my way home, thinking it’s probably better to break the news to my girlfriend with a latte and a cinnamon roll. I was moving to Hong Kong, and I wasn’t ready for her to drop everything and join me there as some tai tai (the colloquial Cantonese term for a wealthy married woman who does not work), spending her time booking restaurants, taking yoga lessons, and planning exotic weekend trips.
Leaving London wasn’t terribly difficult. Don’t get me wrong, it’s one of the great cities in the world. But it takes an incredible amount of money to enjoy London in perpetuity the way that London should be enjoyed. And being just another banker doesn’t exactly cut it when you are surrounded by RAVs (Russians, Arabs, and Villains) who view London as the place to go if you want to buy respectability.
Britain is a country that, since World War II, has been on a managed decline. The men live vicariously through their favorite soccer team, celebrating its success with “a few pints” and commiserating over its failings with “a few pints.” And the women—walking muffin tops. Yet they stride around with a terribly misplaced sense of entitlement.
Even their TV shows are emblematic of their mediocre mentality. EastEnders and Coronation Street are all about fat, dumb, ugly, poor people. And there begins the vicious cycle of complacent underachievers. Maybe I’m biased because, despite being born in England, I grew up in the US. At least our equivalent TV shows are full of good-looking rich people doing big business deals and dating glamorous women. I wouldn’t mind my kids growing up wanting to be J. R. Ewing, but who the fuck wants to be a pub landlord in Essex?
I love London, but I’m looking forward to the change of scenery.
I move to Hong Kong in the fall of 2004. I check myself into the Mandarin Oriental hotel, which will be my home for the next month, or until I find a more permanent place to live.
My tour guide and mentor in Hong Kong is Dennis Lipton, the head of hedge fund sales. He is Mr. Perfect—the handsome all-American lacrosse star in college who joins the Morgan Stanley sales desk in New York, before moving across to Salomon Brothers and rising to the rank of apartment on Central Park West and beach house in Nantucket. He’s the guy at the black-tie charity functions that every older woman wants to introduce to her daughter. He moved to Hong Kong in the wake of the Asian crisis of the late 1990s to ride the wave of growth in hedge funds investing in the region. His housing allowance alone is $15,000 a month (in 2004 dollars), which gets him a house on the Peak, the most prestigious and expensive area of Hong Kong. His kids’ school fees are paid for and the firm even throws in a country-club membership. With two maids, a nanny, and a full-time driver, life in Asia is good for Lipton.
Despite having it all, Lipton is in the process of moving back to New York. While I am not replacing him, our roles are so intertwined that we decide to overlap, with me shadowing him for a few months. The firm wants him to introduce me to most of his key clients to ensure better continuity while it looks for a formal replacement for him.
On my first Monday, he tells me to meet him at 6 p.m. at the Lobster Bar in the Shangri-La hotel so that he can introduce me to one of his best clients. By the time I get there, he’s already pretty lit—drinking by himself.
“Here, you’re gonna need this.” He hands me a piece of paper before I can even sit down. “It�
��s Joe’s cell number. You’re going to need to get to know Joe. He’s our dealer.”
I had heard about people on Wall Street doing drugs, but up until that point, it hadn’t been that big of a deal. Of course, as analysts, we’d sometimes get together and smoke some weed, but only occasionally would we come in contact with anything harder. It was all rather discreet—a far cry from having a virtual stranger tell me having a reliable drug dealer on speed dial is an important part of client coverage.
Joe, as I quickly find out, is the go-to drug dealer for expats. He operates with impunity around Hong Kong’s Central and Mid-Levels Districts and is so brazen that he’ll have one of his associates make midday deliveries in a not-too-subtle souped-up Toyota Supra right in front of our office.
We pound drinks at the Shangri-La for about three hours. Charlie, one of the new sales associates, has joined us, but still no client.
“Okay, we gotta roll,” Lipton declares, even though his glass is still full. “Change of plans, we’re meeting Trainwreck at Vegas.”
“‘Trainwreck at Vegas’?” I’m confused.
“Dude. It’s only one of our best clients. And probably gonna be one of your best friends in Hong Kong after I leave. Let’s go.” Lipton is definitely amped up on something.
This is not how I am accustomed to getting to know new colleagues or meeting clients. I’m not going to let him treat me like his bitch. “Go ahead, man. My drink’s full and Charlie hasn’t even got his yet. We’ll meet you there in a half hour.”
“Okay. Text me. My wife’s in town so I’m on the clock.” He bolts without thinking twice about his bar tab.
Thirty minutes later, I’m calling Lipton from a cab, asking him to pass his phone to the nearest Chinese person so that they can give directions to our driver. Finally, we pull up to some nondescript office building somewhere between Wan Chai and Causeway Bay. We get out and take the elevator up to a floor where there is nothing but a single black door with a speakeasy-type slot.
I ring the bell. A woman’s face appears.
“Hi. We’re here with Dennis Lipton.”
“No, I am sorry.” She closes the window.
I try again. “Denn-iss Liip-tonn. Our friend. Here. We with him.” Although the firm is providing me with Chinese lessons, right now I speak only two languages: English and louder, slower English.
That does the trick. She opens the door and motions for us to follow her down a long, poorly lit corridor. It reminds me of a hotel hallway, with doors running along both sides, each of which presumably leads to a private room. Finally, we reach our destination.
Lipton is sitting on the couch. His pants are around his ankles. Some chick is on her knees, blowing him. And some other chick is standing on the couch, completely naked, with her knees slightly pressed against his shoulders, her pussy in his face. And there he is, our head of hedge fund sales, who makes more than a million bucks a year, married with kids, sitting there, eating out some prostitute.
“Dude,” I shout to announce our entrance, otherwise at a loss for words.
“Yo. Yo. Yo,” he shouts, twisting his neck back so that he can make eye contact. Upon seeing my obvious discomfort, he yells, “What? Pussy’s pussy.”
I survey the room. There’s Lipton and two other white guys, one of whom I presume to be Trainwreck. They each have a girl on their lap; of course Dennis has two. There’s another girl in a cocktail dress singing karaoke in front of a big-screen projection TV, disco ball spinning above her head, and about four other girls sitting around an adjacent table, drinking and playing a dice version of Liar’s Poker.
In front of Lipton is a table with several elaborate and exotic fruit plates. Next to the fruit is a pile of cocaine.
After a quick nod of acknowledgment in lieu of the traditional handshake and business card introduction, Charlie and I pour ourselves the drink du jour—Johnnie Walker and iced green tea—and sit with the girls playing dice.
I won’t lie; we’re having a blast.
Lipton finishes, recharges with a quick bump, and then joins us at the table. “Dude. Sorry, man. I gotta bounce. Fuckin’ curfew.” He’s still buckling his pants and buttoning his shirt. “Yo, I need you to do me a solid and grab this. I don’t have enough cash and my wife checks all my statements.”
“No sweat. I got this.” What else can I say?
“Is my shirt tucked in? Bitch gets suspicious if my shirt’s disheveled.” Never mind the smell of pussy on his breath.
We stayed with Trainwreck and his hedge fund buddy and had a great time until the night faded into a blur. The next morning—a Tuesday—it’s only really when I find my pants, and a few credit card receipts, that I began to piece the night back together. Total receipts for the night, including the Shangri-La bar tab, came in at HK$21,000, or around US$2,700.
I realized a very important thing that had eluded me during my exploratory trip a few months prior: that Lipton was leaving Hong Kong, not because of the opportunity in New York, but because he had a coke problem and his wife was threatening to divorce him.
It’s a good thing that I wasn’t moving here with a wife or a coke problem.
I’ll Call You
on Your Cell
In simple terms, the bond syndicate desk is the bridge between the issuer clients who need money and the investor clients who have money to invest. Hence, it is uniquely positioned above the Chinese Wall—the invisible wall between investment banking and debt capital markets (the private side) and sales and trading (the public side). The Chinese Wall is designed to prevent confidential and material nonpublic information from entering the public domain, even within the same firm.
When it comes to sourcing new deals, my job as a syndicate manager is to provide market intelligence and make strategic recommendations to the bankers and their clients regarding their capital market needs. This advice is based on my evaluation of credit market conditions, prevailing investor sentiment, risk appetite, etc. I work intimately with sales and trading and with their clients, such as asset managers and hedge funds, in order to formulate these market views.
Once we are mandated on a deal, I work directly with the issuer client to plan and implement the appropriate deal strategy—expected pricing, investor marketing requirements (the amount of work we’ll need to do in order to sell the deal, as dictated by the familiarity of the investor base with this issuer and the complexity of the structure), and the execution timetable. Once the deal is announced publicly, I work with the investors to guide and control the entire execution process and their participation in it—from book building through pricing. It is my responsibility to determine the price of each new bond deal and to allocate the bonds to the investors of my choosing. It can be a powerful position, and is one that requires an ability to weigh many risks and unknowns. Being able to prioritize among several important layers and conflicting interests is a must.
There’s a reason that Michael Lewis referred to syndicate managers as the “omniscient, omnipotent, omnivorous Presence” on the trading floor. Our overall objective is to find a result that leaves both the issuer and the investors happy. We help the issuer raise money and develop a good reputation in the capital markets in order to ensure and enhance future access, and we want to make sure the investors see enough upside to keep participating and playing in new issues.
This is the essence of the syndicate job. I gave this same summary almost every year to the group of interns rotating through fixed income. I’d take over the corner conference room during lunch on a quiet summer day, walk them through the entire syndicate process, and then spend some time doing Q&A.
One year, my boss is walking by and, upon seeing me jovially gesticulating to a roomful of twenty-one-year-olds, understandably decides to see what I’m up to. The door swings open; he looks at the kids, looks at me, and then looks over at the white board, shakes his head in dismay, and just walks o
ut without saying a word.
I had always found it far easier to actually draw a diagram of where and how the syndicate desk operates within the capital markets framework. The indirect path I have drawn between issuers (People Who Need Money) and investors (People Who Have Money) is designed to represent the fact that these entities are separated by a Chinese Wall and also to illustrate that the capital markets process is not always entirely efficient.
In practice, once it comes to actually doing deals, the syndicate process is much more fluid, particularly in Asia. There are no diagrams that can possibly represent that, or if there are, they would be written in disappearing ink.
The process starts with a company—the issuer—mandating (selecting) banks to serve as bookrunners for the purpose of helping them raise money. Let’s say a company already has an established relationship with many Wall Street banks; a common practice would be for them to send out a request for proposal, or RFP. They want to hear each bank’s recommendations on pricing, structure, timing, marketing, and fees. This is where I come in. I’ll take a look at the credit; I’ll look at the market comparables—where their outstanding bonds, and those of their peers, are trading. Then I will incorporate this knowledge into my overall sense of market conditions, investor appetite, and structural preference and come up with recommendations.
For a complicated credit or an important pitch, I might sound out the deal to a few investors on a no-names basis, talking them through the credit profile and theoretical deal parameters in general terms for the purposes of getting feedback to help me refine my view. I might say something like, “I’m looking at a possible new high-yield issue for a Chinese property developer with a mid-/high single-B credit rating. They’re predominantly high-end residential in the Hangzhou Province.” From there, we’d get into the nitty-gritty in terms of their property portfolio, leverage, and other specific financial and business metrics. In many cases, a good credit analyst or portfolio manager can easily figure out whom I’m talking about, especially if they are getting calls from other syndicate bankers also sounding out the market for the same deal.