Black

"When major corporations launched their hostile takeovers, they did so on the basis of commitment letters for the financing from commercial banks. Drexel, Icahn suggested, should act like those banks and give him a commitment letter. Sorte and Black thought that Icahn’s demand was outrageous. Drexel, they argued, was acting merely as agent for the lenders to Icahn, and if it gave him a commitment letter, the amount would be charged against the firm’s capital. In two years, however, this strange notion would be known as “bridge financing” and would be the rage on Wall Street. Investment banks would commit their own capital to a deal, in a “bridge” between the time of the offer and the time it actually had to be funded. By funding time, the investment bank would have placed much if not all of the debt with bond buyers. Trying to respond to Icahn’s demand for a letter of commitment, Black finally ventured, “Why don’t we say we’re ‘highly confident’ that we can raise it? It’s really different. It hasn’t been done before.” “Carl looked at me,” Black recalled. “He turned to his lawyer and said, ‘What do you think?’ His lawyer said, ‘Leon’s full of shit. It’s not legally binding, what good is it?’ ” Sometime in the early hours of the morning the meeting broke up, with Icahn saying he was no longer interested in doing the tender offer. But the next morning he called Black and said, “You know that ‘highly confident’ letter you were talking about? . . .” That was the beginning of Drexel’s famed “highly confident”—the pronouncement that would seem, for a time, almost talismanic in its power. One after another, multibillion-dollar tender offers were launched on the power of those two words, uttered by Drexel. It became an article of faith for Milken that once he had said he was “highly confident” that he could raise a given amount of financing for a bid, he would never renege or cut back on the terms, because then, of course, the words would be just words."

"Now Black returned to the scene, telling Icahn that Milken not only would raise the $ 750 million with PARS out of the company, but would raise another $ 500 million war chest, or “blind pool,” in the company in which PARS would be placed. Bond buyers who liked the airline could buy its debt; those who were enamored of PARS could buy that company’s debt; others could mix the two. The company that would be formed to receive PARS—and the $ 500 million—would be called Mandrake (as in the magician)."

"When major corporations launched their hostile takeovers, they did so on the basis of commitment letters for the financing from commercial banks. Drexel, Icahn suggested, should act like those banks and give him a commitment letter. Sorte and Black thought that Icahn’s demand was outrageous. Drexel, they argued, was acting merely as agent for the lenders to Icahn, and if it gave him a commitment letter, the amount would be charged against the firm’s capital. In two years, however, this strange notion would be known as “bridge financing” and would be the rage on Wall Street. Investment banks would commit their own capital to a deal, in a “bridge” between the time of the offer and the time it actually had to be funded. By funding time, the investment bank would have placed much if not all of the debt with bond buyers. Trying to respond to Icahn’s demand for a letter of commitment, Black finally ventured, “Why don’t we say we’re ‘highly confident’ that we can raise it? It’s really different. It hasn’t been done before.” “Carl looked at me,” Black recalled. “He turned to his lawyer and said, ‘What do you think?’ His lawyer said, ‘Leon’s full of shit. It’s not legally binding, what good is it?’ ” Sometime in the early hours of the morning the meeting broke up, with Icahn saying he was no longer interested in doing the tender offer. But the next morning he called Black and said, “You know that ‘highly confident’ letter you were talking about? . . .” That was the beginning of Drexel’s famed “highly confident”—the pronouncement that would seem, for a time, almost talismanic in its power. One after another, multibillion-dollar tender offers were launched on the power of those two words, uttered by Drexel. It became an article of faith for Milken that once he had said he was “highly confident” that he could raise a given amount of financing for a bid, he would never renege or cut back on the terms, because then, of course, the words would be just words."