On his arrival at Seymour’s, only moments after Clive Reynolds, he called for his chief executive. He appeared a few minutes later without his usual armful of files, surprised to see the chairman so early. Once Reynolds was seated Charles opened the file in front of him. “What do you know about Nethercote and Company?”
“Private company. Net asset value approaching £10,000,-000, running a current overdraft of £7,000,000 of which we service half. Efficiently managed with a good board of directors, will ride out the current problems in my view, and should be well oversubscribed when they eventually go public.”
“How much of the company do we own?”
“Seven and a half percent. As you know, the bank never take eight percent of any company because then we would have to declare an interest under section twenty-three of the Finance Act. It has always been a policy of this bank to invest in a major client without becoming too involved with the running of the company.”
“Who are their principal bankers?”
“The Midland.”
“What would happen if we put our seven and a half percent up for sale and did not renew the overdraft facility at the end of the quarter, but called it in instead?”
“They would have to seek finance elsewhere.”
“And if they couldn’t?”
“They would have to start selling their assets, which under that sort of forced-sale position would be very damaging for any company, if not impossible, in the present climate.”
“And then?”
“I would have to check my file and...”
Charles passed over the file and Reynolds studied it carefully, frowning. “They already have a cash-flow problem because of bad debts. With a sudden increased demand they might go under. I would strongly advise against such a move, Chairman. Nethercote have proved a reliable risk over the years, and I think we stand to make a handsome profit when they are quoted on the Stock Exchange.”
“For reasons I cannot disclose to you,” said Charles, looking up from his chair, “I fear that remaining involved with this company may turn out to be a financial embarrassment for Seymour’s.” Reynolds looked at him, puzzled. “You will inform the Midland Bank that we will not be renewing this loan at the next quarter.”
“Then they would have to look for support from another bank. The Midland would never agree to shoulder the entire amount on their own.”
“And try to dispose of our seven and a half percent immediately.”
“But that could lead to a crisis of confidence in the company.”
“So be it,” said Charles, as he closed the file.
“But I do feel—”
“That will be all, Mr. Reynolds.”
“Yes, Chairman,” said the mystified chief executive, who had never thought of his boss as an irrational man. He turned to leave. Had he looked back he would have been even more mystified by the smile that was spread across Charles Seymour’s face.
“They’ve pulled the rug out from under our feet,” said Ronnie Nethercote angrily.
“Who?” said Simon, who had just come into the room.
“The Midland Bank.”
“Why would they do that?”
“An outside shareholder put all his stock on the market without warning, and the Midland got worried about their position. They wouldn’t be prepared to continue such a large overdraft position on their own.”
“Have you been to see the manager?” asked Simon, unable to disguise his anxiety.
“Yes, but he can’t do anything. His hands are tied by a main board directive,” said Ronnie, slumping deeper into his seat.
“How bad is it?”
“They’ve given me a month to find another bank. Otherwise I’ll have to start selling some of our assets.”
“What will happen if we don’t manage to come up with another bank?” asked Simon desperately.
“The company could be bankrupt within weeks. Do you know any bankers who are looking for a good investment?”
“Only one, and I can assure you he wouldn’t help.”
Charles put the phone down satisfied. He wondered if there was anything that could still be regarded as secret. It had taken him less than an hour to find out the size of Kerslake’s overdraft. “Banker to banker confidentiality,” he had assured them. He was still smiling when Reynolds knocked on the door.
“The Midland weren’t pleased,” he immediately briefed Charles.
“They’ll get over it,” his chairman replied. “What’s the latest on Nethercote?”
“Only a rumor, but everyone now knows they’re in trouble and the chairman is searching around for a new backer,” said Reynolds impassively. “His biggest problem is that no one is touching property companies at the moment.”
“Once they’ve collapsed, what’s to stop us picking up the pieces and making a killing?”
“A clause that was slipped through in the Finance Act which your Government passed three years ago. The penalties range from a heavy fine to having your banking license taken away.”
“Oh, yes, I remember,” said Charles. “Pity. So how long do you expect them to last?”
“Once the month is up,” said Reynolds stroking a clean-shaven chin, “if they fail to find a backer the creditors will swarm in like locusts.”
“Aren’t the shares worth anything?” asked Charles innocently.
“Not the paper they are written on at the moment,” said Reynolds, watching his chairman carefully.
This time the chief executive couldn’t miss the chairman’s smile as Charles thought of Simon Kerslake and his overdraft of £108,000 now backed by worthless shares. Pucklebridge would soon be looking for a new member.
At the end of a month during which no bank came to his rescue Ronnie Nethercote caved in and agreed to call in the receiver and file a bankruptcy notice. He still hoped that he could pay off all his creditors even if the shares he and his fellow directors held remained worthless. He felt as worried for Simon and his career as he did for himself, but he knew there was nothing the receiver would allow him to do to help one individual.
When Simon told Elizabeth she didn’t complain. She had always feared this could be the eventual outcome of her husband joining the board of Nethercote.
“Can’t Ronnie help?” she asked. “After all, you’ve supported him enough in the past.”
“No, he can’t,” replied Simon, avoiding telling her where the real responsibility for his downfall lay.
“But do bankrupts automatically have to leave Parliament?” was Elizabeth’s next question.
“No, but I shall because I could never be considered for further promotion — I’d always be rightly tainted with ‘lack of judgment.’”
“It seems so unfair when you weren’t personally to blame.”
“There are different rules for those who wish to live in the spotlight,” Simon said simply.
“But in time, surely—” began Elizabeth.
“I’m not willing to remain on the back benches for another twenty years only to hear whispered in the corner of the smoking room — Would have made the Cabinet if it hadn’t been for...”
“Does that mean the children will have to be taken away from school?”
“I’m afraid so,” said Simon, his hands shaking. “As a bankrupt I can hardly expect the receiver to view the fees for my sons’ education as a dire necessity even if I could find the money.”