Golden Spoon Investment Portfolio - Chapter 426

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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426. I hope you’ll keep this secret safe.

January 15, 1998, Long-Term Credit Bank Headquarters, Chuo Ward, Tokyo, Japan.
Across the long conference table sat John Porter and the staff of the Eldorado Fund’s Japan branch, facing off against representatives from the Long-Term Credit Bank.
While the bank officials appeared visibly tense, Porter, the branch director, spoke with an air of ease, a composed expression on his face.

“Let’s take a look at the valuation.”

Akema Jun, the executive director seated across from him, adjusted his gold-rimmed glasses with one hand and flipped open the file folder before him.
The moment his eyes fell upon the figures written on the documents, his face contorted in disbelief.

[ Book Value Total: 327.089 billion yen
Bond Purchase Price: 114.820 billion yen ]

Akema looked up, his face hardened into a rigid mask as he fixed his gaze on the man across from him.
Porter, the branch director, maintained his unhurried demeanor throughout, a smile playing at the corners of his mouth.
Astounded and exasperated by such brazen audacity in presenting this figure, Akema struggled to contain his rising anger as he spoke.

“What on earth is this!”
“As you can see, this is the bond purchase price as evaluated by our firm.”
“So you’re saying this isn’t a mistake—this is actually what you calculated?”
“That’s correct.”
“Are you trying to make a fool of us!”

As Akema’s voice rose in fury, the bank officials on either side exchanged glances, their eyes darting toward the figures on the documents.
In unison, they gasped and wore expressions of equal shock.

“What is this…”
“This can’t be right.”

As everyone stirred in agitation, Akema fixed Porter with a cold stare and spoke.

“You’re slashing bonds worth over 300 billion yen by more than half—is this really your final calculation!”
“Less than 35% of the book value—this is absolutely an unacceptable price.”

Okada Hiroyuki, the department head responsible for the operational details, interjected with his face flushed red.
Despite the fierce, predatory glare in their eyes—as if they were staring down a highway robber—Porter maintained an unruffled composure, lifting the teacup before him and taking a measured sip of green tea before setting it back down.
Then, surveying the faces of Akema Jun, visibly seething with anger, and the bank officials, he spoke in a measured tone.

“I myself was quite startled by the figures that emerged after completing the detailed assessment. However, upon reviewing the specifics, I found them reasonable. Still, considering this is our first transaction with the Long-Term Credit Bank of Japan, I’ve presented the highest possible valuation.”

Upon hearing this, Akema Jun let out a hollow laugh as if the very notion were absurd.

“You’re calling that a generous offer?”
“Yes, I am.”

Akema Jun’s expression hardened as he slammed his palm forcefully against the table.

“You’re making a mockery of us!”

In that instant, the air in the conference room froze solid.
Yet Porter, still bearing a faint smile at the corners of his mouth, spoke in fluent Japanese.

“Please, compose yourselves. Allow me to explain the reasoning behind how I’ve determined the purchase price.”

At that, Akema Jun crossed his arms while remaining seated, as if to say, “Go ahead and try.”

“I’d like to hear what absurd, nonsensical calculation method produced this price.”

Porter turned his head and gestured to Rider, who had accompanied him.

“Please provide the explanation.”
“Yes.”

Rider, a former Lehman Brothers employee with extensive experience in Japan, unfolded the file he’d brought and slid it toward Akema Jun, speaking in fluent Japanese.

“As you can see, we’ve evaluated the securities for sale by dividing them into three grades: A, B, and C. Unfortunately, among the fifty-seven securities that came up in this bulk sale, there isn’t a single one rated A—meaning high recovery potential—and the vast majority are rated C, the lowest grade.”

Akema Jun pulled the file toward himself and rapidly flipped through the assessment sheets for each of the fifty-seven securities.
When he saw that more than half of them were valued at zero yen, his face flushed crimson with rage.
Okada Hiroyuki, standing beside him, could no longer contain his fury and burst out shouting.

“All these securities valued at zero yen? You’re treating us like fools!”
“I understand your disappointment with these results, but I would appreciate it if you could refrain from such excessive language.”

Porter, the branch manager, suppressed him with a calm but forceful voice.

“I——!”
“That’s enough.”

Okada Hiroyuki, seething with indignation, was about to fire back when Akema Jun cut him off.
Fixing Porter with a piercing stare, Akema Jun’s voice dropped to a measured tone.

“Let’s hear him out first.”

As Okada Hiroyuki reluctantly fell silent, Rider resumed his remarks with clinical precision.

“To be clear, the bond valuations listed in the documents are the result of objective assessment.”

Okada Hiroyuki swallowed the objection rising in his throat—that this was hardly a rational price.

“Take Bond No. 12, for instance. The borrowing company has already fallen into a state of capital erosion and lost its ability to repay, yet instead of forced collection or loss recognition, the principal and repayment period were restructured, and you’re merely collecting interest.”

Rider, catching Okada Hiroyuki’s hesitation, continued with measured composure, a faint smile playing at his lips.

“The repayment period is a full twenty years, and the restructured interest rate falls far short of normal market rates.”
“That’s——”
“Despite these generous terms, the likelihood of that company actually repaying the loan is virtually nonexistent, which is why we’ve assessed the bond value at zero.”

He emphasized the word “generous” pointedly, causing Okada Hiroyuki and the other bank officials to avert their eyes.
Observing this from the side while sipping green tea, Porter allowed a thin smile to cross his lips.

“While economic conditions are certainly difficult, the company still exists, and more importantly, there are factory facilities and buildings held as collateral. A valuation of zero yen is incomprehensible!”

Okada Hiroyuki, cornered, protested with forced insistence, barely masking his alarm.
Rider responded calmly, as if he’d anticipated this.

“You’re right. However, you must understand that pursuing repayment from the debtor or seizing and liquidating the collateral requires considerable time and expense.”
“Regardless, once the collateral is disposed of, money comes in, doesn’t it!”

Okada Hiroyuki pressed his point without yielding.
But Rider simply waved his hand dismissively and spoke.

“That’s not quite right. Even if we invest considerable resources in debt recovery, there’s no guarantee of success. Moreover, considering how sharply collateral values have plummeted due to the bubble collapse, we could very well end up in the red.”
“….”
“These are the reasons behind the valuation you’re looking at.”

Okada Hiroyuki found himself at a loss—the logic was airtight and difficult to refute—yet he couldn’t simply retreat now.

“But even if everything you’ve said is true, interest payments continue to flow in, so the bond value can’t possibly be zero yen, can it?”

At that, Porter stepped in to respond instead of Rider.

“I’ll address that particular point.”

Porter fixed his gaze on Akema Jun, who had remained silent until now, before speaking.

“Beyond the loan example I cited, we found numerous other bonds with virtually identical debt restructuring arrangements under equally unreasonable terms. What’s more, when we dug a bit deeper, we discovered that the entity providing interest financing to these debtors was your company’s affiliated credit card company.”

Akema Jun visibly flinched at this revelation.

“Isn’t that far too much of a coincidence to dismiss as mere chance?”

Porter narrowed his eyes slightly as he posed the question.

“Are you suggesting we engaged in accounting fraud?”

Akema Jun’s expression hardened into a glare, and Porter took a step back.

“I’m merely stating what the circumstances suggest. If my words have caused offense, I apologize.”

Akema Jun, burdened by too many vulnerabilities, could only flush with anger and say nothing more.

“In any case, as you’ve heard, the bond purchase price we’ve presented is derived from objective evaluation.”

Then Akema Jun pointed his finger at a section of the bond list spread across the table.

“Even if the difficult-to-recover bonds are as you say, there are also assets with sufficient collateral value—like the building located here in Roppongi. Why is that valued at zero yen?”

Akema Jun pressed the question with an edge to his voice.
Yet Porter answered with unflappable composure.

“Real estate prices have fallen significantly due to the market downturn, but there’s no denying that a commercial building in central Tokyo possesses considerable value.”

Akema Jun, who had been lifting his chin with a self-satisfied expression, suddenly contorted his face at what came next.

“But you’re aware, I’m sure, that not all creditors are equal—the valuation differs according to the priority of the collateral.”
“…!”
“Most of the high-value real estate, including the Roppongi building you mentioned, are registered with second or third-priority mortgages rather than first priority. In other words, even if we seize and sell the collateral, there’s a possibility we won’t recover a single yen due to being subordinated to higher-priority claims.”

Okada Hiroyuki interjected with a rebuttal.

“Though they are subordinated, most are located in prime areas like Roppongi and Ginza, so we should be able to recover the loan sufficiently through their sale.”
“Of course, that would normally be the case. But that’s only if we can dispose of them properly.”
“…?”

Porter, observing Okada’s furrowed brow, continued.

“The real estate with high collateral value all have one thing in common—their current owners are problematic.”
“What do you mean by that?”

Porter leaned back in his chair, his sharp gaze piercing.

“They wear the façade of real estate development companies, but in reality, they’re owned by yakuza. Exercising rights over such properties is practically impossible.”

Okada’s words caught in his throat.
Assuming a foreign fund would be unfamiliar with Japan’s internal affairs, he had deliberately mixed in troublesome receivables.
Yet instead of being deceived, Porter had seen through the carefully concealed trap with precision. Even Akema Jun couldn’t help but exhale a silent curse inwardly.
If this continued, their original plan to dump non-performing loans on the Eldorado Fund would completely fall apart.
Still unable to back down, Akema Jun pressed forward.

“Fair enough. Even setting aside the problematic ones, there are still a considerable number of receivables with sufficient collateral value, like the Rockefeller Center, aren’t there?”
“Because there are some decent receivables as you say, we arrived at this price point.”
“Even so, this seems like an excessive discount.”

Seeing Akema Jun’s dissatisfied expression, Porter spoke in a measured tone.

“With the Ministry of Finance’s due diligence approaching, don’t we need to demonstrate that the Long-Term Credit Bank of Japan is making efforts to dispose of non-performing loans by processing the most difficult-to-recover receivables? Moreover, we should also clear out the awkward receivables that would be problematic if exposed, so there are no lingering issues afterward.”
“Hmm.”

Akema Jun’s mouth turned bitter as he realized I had already seen through all of his intentions.
However, since I was right that the questionable bonds needed to be disposed of before the Ministry of Finance’s audit, his deliberation didn’t last long.

“Very well. But there is one condition.”
“Do tell me what it is.”

Akema Jun fixed a sharp gaze on Porter’s composed face before speaking.

“No matter how we frame this as a bulk sale, selling at too low a price could create problems later. I would like you to inflate the disposal costs slightly and include them in the purchase price. Can you do that?”

He was attempting a sleight of hand—padding the costs to make it appear as though the defective bonds had been sold at a higher price than they actually were.
Since the Eldorado Fund had nothing to lose, Porter readily agreed.

“Let’s do it that way. Would adding another 1 billion yen or so suffice?”

Akema Jun nodded and secured the commitment once more.

“I trust you will keep the matter of these bulk sale bonds strictly confidential.”
“Rest assured.”

Porter’s white teeth gleamed brilliantly as he flashed a broad smile.
Thus, the Eldorado Fund had acquired bonds with a book value exceeding 327 billion yen at a fraction of their worth.

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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