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  Peter gave a nervous laugh as he unscrewed the top of the pen. He hesitated until he felt Armstrong’s fingers tightening round his shoulder.

  “Your position as deputy chairman comes up for renewal in a few weeks’ time, doesn’t it?” said Armstrong.

  Peter signed the first three checks.

  “And Paul Maitland won’t go on for ever, you know. Eventually someone will have to take his place as chairman.”

  Peter continued signing.

  FINAL EDITION

  Double or Quits

  36.

  Daily Express

  8 February 1991

  CABINET ESCAPES AS IRA BOMB EXPLODES IN GARDEN OF NO. 10

  “Bitten Off More than They Can Chew” was the headline on the article in the Financial Times. Sir Paul Maitland, sitting by the fire at his home in Epsom, and Tom Spencer, traveling in from Greenwich, Connecticut, on a commuter train, both read the article a second time, although only half the contents were of any real interest to them.

  The press barons Keith Townsend and Richard Armstrong appear to have made the classic mistake of leveraging their borrowings on far too high a ratio against their assets. They both look destined to become case studies for future generations of students at Harvard Business School.

  Analysts have always agreed that Armstrong initially appeared to have pulled off a coup when he purchased the New York Tribune for only twenty-five cents while all the paper’s liabilities were underwritten by the former owners. The coup might have turned into a triumph had he carried out his threat to close the paper down within six weeks if the unions failed to sign a binding agreement. But he did not, and then he compounded his mistake by eventually giving such a generous redundancy settlement that union leaders stopped calling him “Captain Dick” and started referring to him as “Captain Santa.”

  Despite that settlement, the paper continues to lose over a million dollars a week, although agreement on a second package of redundancies and early retirements is thought to be imminent.

  But while interest rates continue to rise and the vogue for cutting the cover price of newspapers continues, it cannot be long before the profits of the Citizen and the rest of the Armstrong Communications group will no longer be able to sustain the losses of its American subsidiary.

  Mr. Armstrong has not yet informed his shareholders how he intends to finance the second settlement of $320 million recently agreed with the New York print unions. His only reported statement on the subject is to be found in the columns of the Tribune: “Now that the second package has been accepted by the unions, there is no reason to believe that the cash flow of the Tribune shouldn’t prove positive.”

  The City remained skeptical of this claim, and shares in Armstrong Communications fell yesterday by a further nine pence to £2.42.

  Keith Townsend’s mistake …

  The phone rang, and Sir Paul put the paper down, rose from his chair and went into his study to answer it. When he heard the voice of Eric Chapman, he asked him to wait for a moment while he closed the door. This was somewhat unnecessary, as there was no one else in the house at the time, but when you’ve been the British Ambassador in Beijing for four years, some habits die hard.

  “I think we ought to meet immediately,” said Chapman.

  “The Financial Times article?” said Sir Paul.

  “No, it’s potentially far more damaging than that. I’d rather not say too much over the phone.”

  “I quite understand,” said Sir Paul. “Shall I ask Peter Wakeham to join us?”

  “Not if you want the meeting to remain confidential.”

  “You’re right,” said Sir Paul. “Where shall we meet?”

  “I could drive over to Epsom straight away. I should be with you in about an hour.”

  * * *

  Tom Spencer skimmed through the first half of the article as his train headed past Mamaroneck on its journey into New York. He only began to concentrate fully when he reached the words:

  Keith Townsend’s mistake was to want something so badly that he failed to keep to the basic rules of closing a deal.

  Every schoolboy knows that if you hope to exchange old conkers for an unopened packet of crisps, not only must you never blink, you must also wait for your opponent to make the opening bid. But it seems that Townsend was so determined to own Multi Media that he never stopped blinking, and without asking how much Henry Sinclair might be willing to sell the company for, he made an unsolicited offer of $3 billion. He then compounded his problems by agreeing to pay the full amount in cash.

  Just as the print unions in New York refer to Mr. Armstrong as “Captain Santa,” Mr. Sinclair could be forgiven for thinking Christmas had come early this year—especially when it was common knowledge that he had been on the point of closing a deal with Armstrong for $2 billion, and even that, it is now thought, would have been too high a price.

  Having agreed terms, Mr. Townsend found it extremely difficult to raise the cash within the thirty days stipulated by Mr. Sinclair. And by the time he had finally done so, it was on such exorbitant terms that keeping to the punitive repayment schedule may in the end prove terminal for the rest of Global International. Throughout his life Mr. Townsend has been a gambler. With this deal he has proved that he is willing to risk everything on a single throw of the dice.

  On reporting their half-year forecast yesterday, Global shares fell a further eight pence to £3.19.

  Over and above any problems the two press barons are currently facing, both of them will be particularly hard hit by the steady rise in the price of paper and the dollar’s current weakness against the pound. If the combination of these trends continues for much longer, even their cash cows will run out of milk.

  The future of both companies now rests in the hands of their bankers, who must be wondering—like the creditors of a Third World nation—if they will ever see the interest, let alone the long-term debt, being repaid. Their alternative is to cut their losses and agree to participate in the biggest fire sale in history. The final irony is that it would only take one bank to break the link in the lending chain and the whole edifice will come crashing down.

  As one insider put it to me yesterday, if either man were to present a check at the moment, their check would bounce.

  Tom was the first person off the train when it pulled in to Grand Central station. He ran to the nearest phone booth and dialed Townsend’s number. Heather put him straight through. This time Townsend listened attentively to his lawyer’s advice.

  * * *

  When Armstrong finished reading the article he picked up an internal phone and instructed his secretary that if Sir Paul Maitland should call from London, he was out. No sooner had he replaced the receiver than the phone rang.

  “Mr. Armstrong, I’ve got the chief dealer at the Bank of New Amsterdam on the line. He says he needs to speak to you urgently.”

  “Then put him through,”’ said Armstrong.

  “The market is being flooded with sell orders on Armstrong Communications stock,” the dealer informed him. “The share price is now down to $2.31, and I wondered if you had any instructions?”

  “Keep buying,” said Armstrong without hesitation.

  There was a pause. “I must point out that every time the shares drop a cent, you lose another $700,000,” said the chief dealer, quickly checking the number of shares that had been traded that morning.

  “I don’t care what it costs,” said Armstrong. “It’s a short-term necessity. Once the market has settled again, you can release the shares back onto the floor and gradually recoup the losses.”

  “But if they continue to fall despite…”

  “You just keep on buying,” said Armstrong. “At some point the market is bound to turn.” He slammed down the phone and stared at the photograph of himself on the front page of the Financial Times. It wasn’t flattering.

  * * *

  The moment Townsend had finished reading the article, he took Tom’s advice and called hi