When talking to local bank managers one listened attentively for what they left out, but Oliver Knowles’ bank manager left out not much. Without in the least discussing his client’s affairs in detail he said that occasional fair-sized loans had so far been paid off as scheduled and that Mr Knowles’ business sense could be commended. A rave notice from such a source.
‘Oliver Knowles?’ a racing acquaintance from the long past said. ‘Don’t know him myself. I’ll ask around,’ and an hour later called back with the news. ‘He seems to be a good guy but his wife’s just buggered off with a Canadian. He might be a secret wife-beater, who can tell? Otherwise the gen is that he’s as honest as any horse-breeder, which you can take as you find it, and how’s your mother?’
‘She’s fine, thanks. She remarried last year. Lives in Jersey.’
‘Good. Lovely lady. Always buying us icecreams. I adored her.’
I put the receiver down with a smile and tried a credit rating agency. No black marks, they said: the Knowles credit was good.
I told Gordon across the room that I seemed to be getting nothing but green lights, and at lunch that day repeated the news to Henry. He looked around the table, collecting a few nods, a few frowns and a great deal of indecision.
‘We couldn’t carry it all ourselves, of course,’ Val said. ‘And it isn’t exactly something we could go to our regular sources with. They’d think us crackers.’
Henry nodded. ‘We’d have to canvas friends for private money. I know a few people here or there who might come in. Two million, I think, is all we should consider ourselves. Two and a half at the outside.’
‘I don’t approve,’ a dissenting director said. ‘It’s madness. Suppose the damn thing broke its leg?’
‘Insurance,’ Henry said mildly.
Into a small silence I said, ‘If you felt like going into it further I could get some expert views on Sandcastle’s breeding, and then arrange blood and fertility tests. And I know it’s not usual with loans, but I do think someone like Val should go and personally meet Oliver Knowles and look at his place. It’s too much of a risk to lend such a sum for a horse without going into it extremely carefully.’
‘Just listen to who’s talking,’ said the dissenter, but without ill-will.
‘Mm,’ Henry said, considering. ‘What do you think, Val?’
Val Fisher smoothed a hand over his always smooth face. ‘Tim should go,’ he said. ‘He’s done the groundwork, and all I know about horses is that they eat grass.’
The dissenting director almost rose to his feet with the urgency of his feelings.
‘Look,’ he said, ‘all this is ridiculous. How can we possibly finance a horse?’
‘Well, now,’ Henry answered. ‘The breeding of thoroughbreds is big business, tens of thousands of people round the world make their living from it. Look upon it as an industry like any other. We gamble here on shipbuilders, motors, textiles, you name it, and all of those can go bust. And none of them,’ he finished with a near-grin, ‘can pro-create in their own image.’
The dissenter heavily shook his head. ‘Madness. Utter madness.’
‘Go and see Oliver Knowles, Tim,’ Henry said.
Actually I thought it prudent to bone up on the finances of breeding in general before listening to Oliver Knowles himself, on the basis that I would then have a better idea of whether what he was proposing was sensible or not.
I didn’t myself know anyone who knew much on the subject, but one of the beauties of merchant banking was the ramification of people who knew people who knew people who could find someone with the information that was wanted. I sent out She question-mark smoke signal and from distant out-of-sight mountain tops the answer puff-puffed back.
Ursula Young, I was told, would put me right. ‘She’s a bloodstock agent. Very sharp, very talkative, knows her stuff. She used to work on a stud farm, so you’ve got it every whichway. She says she’ll tell you anything you want, only if you want to see her in person this week it will have to be at Doncaster races on Saturday, she’s too busy to spend the time else.’
I went north to Doncaster by train and met the lady at the racecourse, where the last Flat meeting of the year was being held. She was waiting as arranged by the entrance to the Members’ Club and wearing an identifying red velvet beret, and she swept me off to a secluded table in a bar where we wouldn’t be interrupted.
She was fifty, tough, good-looking, dogmatic and inclined to treat me as a child. She also gave me a patient and invaluable lecture on the economics of owning a stallion.
‘Stop me,’ she said to begin with, ‘if I say something you don’t understand.’
I nodded.
‘All right. Say you own a horse that’s won the Derby and you want to capitalize on your goldmine. You judge what you think you can get for the horse, then you divide that by forty and try to sell each of the forty shares at that price. Maybe you can, maybe you can’t. It depends on the horse. With Troy, now, they were queuing up. But if your winner isn’t frightfully well bred or if it made little show except in the Derby you’ll get a cool response and have to bring the price down. OK so far?’
‘Um,’ I said. ‘Why only forty shares?’
She looked at me in amazement. ‘You don’t know a thing, do you?’
‘That’s why I’m here.’
‘Well, a stallion covers forty mares in a season, and the season, incidentally, lasts roughly from February to June. The mares come to him, of course. He doesn’t travel, he stays put at home. Forty is just about average; physically I mean. Some can do more, but others get exhausted. So forty is the accepted number. Now, say you have a mare and you’ve worked out that if you mate her with a certain stallion you might get a top-class foal, you try to get one of those forty places. The places are called nominations. You apply for a nomination, either directly to the stud where the stallion is standing, or through an agent like me, or even by advertising in a breeders’ newspaper. Follow?’
‘Gasping,’ I nodded.
She smiled briefly. ‘People who invest in stallion shares sometimes have broodmares of their own they want to breed from.’ She paused. ‘Perhaps I should have explained more clearly that everyone who owns a share automatically has a nomination to the stallion every year.’
‘Ah,’ I said.
‘Yes. So say you’ve got your share and consequently your nomination but you haven’t a mare to send to the stallion, then you sell your nomination to someone who has a mare, in the ways I already described.’
‘I’m with you.’
‘After the first three years the nominations may vary in price and in fact are often auctioned, but of course for the first three years the price is fixed.’
‘Why of course?’
She sighed and took a deep breath. ‘For three years no one knows whether the progeny on the whole are going to be winners or not. The gestation period is eleven months, and the first crop of foals don’t race until they’re two. If you work it out, that means that the stallion has stood for three seasons, and therefore covered a hundred and twenty mares, before the crunch.’
‘Right.’
‘So to fix the stallion fee for the first three years you divide the price of the stallion by one hundred and twenty, and that’s it. That’s the fee charged for the stallion to cover a mare. That’s the sum you receive if you sell your nomination.’
I blinked.
‘That means,’ I said, ‘that if you sell your nomination for three years you have recovered the total amount of your original investment?’
That’s right.’