Charter First, Build With Their Credit

“The idea was to use other people’s credit. First he would go to an oil company and persuade it to grant him a long-term charter to haul its petroleum. This done, he would go to a bank, where, using the charter as collateral, he’d take out a loan to obtain a ship to haul the petroleum. Instead of paying D.K., each oil company would make the charter payments directly to the bank, which would deduct the loan payment and put whatever was left into Ludwig’s account.”

“It was at this time that D.K. came up with the “two-name paper” arrangement he later told Dero Saunders was the chief reason for his wealth. It all sounded so simple: go to an oil company; get it to sign a long-term charter to ship so much oil on a regular basis; take the charter to a bank and, using it as collateral, obtain a loan to build or renovate a ship to haul the oil to fulfill the charter. This may sound like “the house that Jack built,” but it was advan¬ tageous to all parties involved. And Ludwig would have a steady income as long as he fulfilled his charter obligations. He would also be free of most of the bookkeeping. The oil company, instead of paying him directly, would send the charter fees to the bank, which would take out the loan payment due and deposit the rest in Lud¬ wig’s account. The plan was legal, logical, and ingenious. But there was much more to the two-name paper than D.K. explained to Saunders. One fact he did not mention in the Fortune interview was that in 1936 he was able to start his climb toward being the world’s biggest shipper mainly because he had finally managed to hook into the big time. He was now hauling oil for the Rockefeller empire.”