She handed Rob and me a folder with glossy photographs of models of the new casino. The building did look impressive. Its two most distinctive features were a tall white tower, and a large glass atrium filled with trees and water. Rob, I noticed, scarcely looked at the folder, but kept his eyes firmly on Cathy.
'A good location is important to ensure that the casino attracts as many of the casual passers-by as possible,' she went on, handing us maps of Las Vegas. 'The Tahiti is located on the 'Strip', between The Sands and Caesar's Palace. These are two of the most popular casinos in Las Vegas, and we expect that many visitors to these locations will want to step into the Tahiti to see what it is like.
'The casino has two thousand five hundred hotel rooms, including twelve luxury Imperial suites which will be made available free to the target list of the biggest high-rollers in the world. There is also parking space for four thousand cars and a one-thousand-seat showroom, where famous entertainers will perform every night. The aim of all this is not to make money, but rather to attract people to the tables.
'The whole complex will cost three hundred million dollars. It is just being completed now and is due to open at the beginning of September. I would like you to look at the financial forecasts I have here.' Cathy passed Rob and me two documents. 'As you can see, the casino's cash flow is expected to be twice as high as its interest costs in the first year. As you look further into the future, you will see that this ratio rises as the casino becomes more profitable.
'The new bonds will have a coupon of 14 per cent and a maturity of ten years. They will be secured with a first mortgage on the casino, so that if it does not make enough money to pay back debt, then you will become owners of a very attractive property.
'Any questions?' The haughtiness in Cathy's voice rose a notch as she threw this out like a challenge.
There was silence for a minute whilst I quickly looked over the numbers in front of me. The deal did look as though it might be interesting, but there was a lot more I would have to find out.
'I have to admit that I don't know very much about the casino business,' I said. 'And there is a lot more research which I will have to do. But I do have a couple of initial questions. Firstly, what happens to these wonderful forecasts if there is a recession?'
'It's well known that the industry does not suffer in a recession,' said Cathy. 'In fact, occupancy rates increased in the recession of the early eighties. The reason is that people actually like to gamble more when times are hard.' She looked at me, daring me to contradict her.
I looked steadily back at her, and didn't say anything for a moment or two. I don't like being patronised, however good-looking the patroniser may be. I wasn't going to let her put me off. 'I can see that may be true,' I said. 'But hasn't much of the development in Las Vegas in recent years been aimed at making it a destination for the family holiday?'
'Yes. In fact, in addition to attracting wealthy gamblers, the Tahiti is expected to be one of the top destinations for families in the next decade.'
'Little junior has got to learn his poker game somewhere,' said Cash with a laugh.
'I see,' I said. 'But isn't the family holiday one of the first things to be cut back in difficult times?'
'Perhaps.'
'In that case, won't there be fewer people coming to Las Vegas in a recession, and won't profits fall sharply?'
There was a short silence as Cathy shuffled the numbers in front of her nervously. 'As you yourself mentioned, you are new to this business. Analysts are unanimous that the effect of a recession on the gaming industry would be negligible. It is well known that during the depression of the 1930s, gambling actually increased.'
She was floundering, but she clearly wasn't going to concede my point, so I let it drop. 'I have a second question. Whenever you are lending money to someone, no matter what business they are in, it is important to know something about them. Who owns the Tahiti?'
Cathy was quick to answer, on surer ground again. 'A man named Irwin Piper. He is a well-known investor on Wall Street. He is generally recognised as a winner, his purchase of Merton Electronics ten years ago was one of the great successes of the eighties; he quadrupled his money in three years. He has also been involved in a number of leisure projects in the past, and he has made money out of them. He is a good man to back, believe me.'
'I see.' I asked another question, 'Doesn't Las Vegas have a reputation for attracting organised crime? How do I know this man is clean?'
'Just because he owns a casino, it doesn't mean he is a crook,' said Cathy sniffily. 'It's true that there were cases of organised crime in Las Vegas in the fifties and sixties, but nowadays the Nevada Gaming Commission runs very strict checks on people before granting them licences to own or manage a casino. If an applicant has ever been involved, or even been suspected of involvement, in any criminal activities at all, then the Commission won't grant a licence. I can assure you Irwin Piper is clean.'
'Nevertheless, I feel uncomfortable lending someone money if I have never met them,' I said.
'Look, if the Nevada Gaming Commission's thorough investigations aren't good enough for you, then you will never be satisfied,' Cathy snapped.
This was getting seriously annoying. After all, I was the customer. And I wasn't going to buy these bonds until I could get completely comfortable with the owner, his casino, and the industry.
Cash sensed this. He had not become Bloomfield Weiss's top salesman by bludgeoning alone. New junk bond issues carry the highest sales commission, and he was prepared to go a long way to try to land a sale, even if there was only a half-chance of success.
'Look, Paul. If we can get satisfactory answers to your questions, will you buy these bonds?'
'Well, I would need to think about it some more. But there is a good chance I would, yes,' I said.
'OK. Let me suggest two things. First, Irwin Piper is passing through London in a couple of weeks' time. I've met him. He's a great guy. I may be able to fix for you to meet him. Have an informal drink. How does that sound?'
'That would be very helpful. Thank you.'
'OK, I'll call you tomorrow to tell you where and when. The other thing I wanted to mention was our annual High Yield Bond Conference. It will be in Phoenix at the beginning of September. There will be an opportunity to visit the Tahiti in Las Vegas at the end of the conference. You will also get a chance to see the management of a number of other companies that issue high yield bonds. Would you like to come? It should be fun. Cathy and I will be going.'
'Well, thank you very much,' I said. 'I will have to check with Hamilton first, but that does sound interesting. I suppose I will get a chance to see the savings and loan Cathy mentioned earlier.'
Cash's blue, piggy eyes looked at me questioningly for a moment. Then he coughed uncomfortably, and looked at his hands clasped in front of him.
'I'm sorry, client confidentiality. I understand,' I said, although I didn't quite understand.
With that, the meeting broke up.
As soon as the lift doors had closed on Cash and Cathy, Rob turned to me. 'Phew! Don't you think she's gorgeous? Can you believe those legs?'
I couldn't argue about the legs. I could argue about the girl.
'She's all yours, Rob. Talk about arrogant. She makes Cash look as sweet as a kitten.'
'You just didn't like her showing you up like that,' said Rob. 'She obviously knows her stuff. Beautiful, and intelligent too. I'm sure she was looking at me all through that meeting. I think I'll give her a ring and see what she's doing tonight.'
'You must be out of your tree. She'll eat you alive,' I said. But I knew it was no use. When it came to women, Rob was definitely out of his tree, and he would probably enjoy being eaten alive.
As we walked back into the office, Hamilton called me over. 'How did it go?' he asked.
'Pretty well,' I said. 'I'll need to do a fair bit more work on it, but I may well get comfortable with the credit in the end.' I told him some of the details of our discussion. 'It certainly will be worth while seeing the owner. Cash also invited me to their high yield conference in Phoenix. He said there would be a number of companies that issue junk bonds present. What do you think?' Hamilton could be tight on expenses and I feared the answer would be no.
But I was wrong. 'You should go. I'd like to begin buying a few junk bonds soon, and it will be a lot easier if you have seen the managements speak. You might learn something from other investors, too. It's always worth gathering information.'
