Bank of New Zealand

"It was a time of absurdly easy credit, particularly for companies that had a track record and strong personal relationships with bankers. ‘The Bank of New Zealand would lend us anything,’ George wryly observes. ‘The bankers almost became personal friends.’ Businessman Alan Gibbs, who would become an investor in Heatley’s next project, Sky Television, describes the mid-eighties as a crazy, speculative period. ‘Between the drop in the exchange rate [after the 1984 election] and the sharemarket crash in October ’87, New Zealand had the biggest boom in its history and one of the biggest booms anywhere,’ Gibbs says. ‘Everybody’s share price went through the roof. You could make dough out of anything.’ Some companies that had depended on import licensing for their monopolies proved to be unprofitable once genuine competition appeared. As they faltered they were picked up cheaply by the new corporates. The behemoth Brierley Investments Ltd (BIL) was expert in that field. Atlas Majestic, the first stock that Heatley had purchased as a boy, was one of the companies that Gibbs took over."

"Collins recalls BIL’s treasurer being invited to speak to a group of the BNZ’s senior corporate bankers. He was asked to talk to them about how he had rung the bank at 9 a.m. and by 5 p.m. had in place a $500 million loan facility. ‘The point of the example,’ says Collins, ‘was to encourage all the corporate bankers to lend more and more money and this was an illustration of how to respond quickly to what clients wanted.’ In hindsight, the incident could just as easily have been used to illustrate the lack of caution in corporate borrowing and lending, and how inadequate bank oversight was at the time. There were many contributing factors and perhaps it should have been no surprise that, to taxpayers’ chagrin, just a couple of years later the Bank of New Zealand needed a bailout."

"Alongside Gibbs and Richwhite, two Fay, Richwhite men, Rob Cameron, a former senior Treasury official, and Steve Walker (‘Wakka’), a young thruster, rounded off the core of the team. For a while they called themselves the ‘Steam Team’, after a local brew in San Francisco (Anchor Steam) which they’d drunk in large quantities on American visits. In May 1989, a few months into their quest for Telecom, Gibbs was stunned to learn that Michael Fay had successfully obtained a 30 per cent stake in the Bank of New Zealand for Capital Markets, a public company Fay, Richwhite controlled. Richwhite remembers Gibbs yelling, ‘Why the hell did you want to buy a bloody bank?’ ‘He rang up a few hours later to apologise and said it was an amazing deal, well done; but Gibbsie’s first reaction was right.’ It emerged that the BNZ was laden with bad debts, mostly in Australia, making the investment a sour one."

"Gibbs was happy now. As September 1993 drew near, when Freightways and Midavia Holdings had to buy their 224 million Telecom shares from the Americans at the privatisation price of $1.81, the share price was floating upwards towards the $4.00 range. Gibbs’ and Farmer’s pay day arrived when they outlaid around $200 million for their 112 million shares and immediately sold 67.5 million on the open market for $256 million (at an average price of $3.80 a share). They’d made more than $50 million instantly and still retained 50 million shares, with a market value of $210 million. Gibbs was convinced these shares would continue to rise in value; Fay and Richwhite, who had other pressing calls on their money, sold down their shareholding more rapidly.[41](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477273-050103421-41) Brilliant negotiations in 1990 and the insistence of a second round of restructuring in 1992 to set the company back on track had produced the highlight in a successful career of deal making. Real money is often made at the point of discontinuities: when seismic shifts occur in the economy, such as from a regulated environment to a deregulated one, or from state enterprise to privatisation. Such conditions provide the opportunity for a few smart entrepreneurs who are in the right place at the right time to prosper extraordinarily. But, as the purchasers of the Bank of New Zealand, New Zealand Steel and the Central North Island Forest discovered, there was nothing automatic about profiting from privatisations."