JPMorgan's Attorneys Blew It (Like A Ref)
An old friend of mine, a guy I've known since I was 10, was in town last night. It was a rare treat to see him, as he works a lot and lives in NYC with his wife and son. We hung out, caught up, and watched the Warriors/Lakers game. And what a game it was. The Warriors are the best show in the NBA.
Says Truehoop:
The Lakers and Warriors better meet in the playoffs. It's unbelievably fun to watch them play each other. If sports are an analogy for war, then the Warriors, it occurs to me, play the role of terrorists. They'll never rule, but they'll take somebody down with them.
The Lakers got the win thanks to a horrible call by the refs on a dirty, dirty play by Fish. Also, Monta Ellis is an amazing finisher. Unreal.
Anywho, my friend works for Bear Stearns, and he told us a little bit about a tiny mistake that's causing HUGE problems for JPMorgan. Apparently JPMorgan's attorneys mis-worded one sentence in one clause of the contract formalizing this huge, extremely complex acquisition. The result? By the language of that sentence, JPMorgan agreed to be responsible for Bear's debt, no matter what. In other words, even if Bear's shareholders rejected the offer and the deal fell through, JPMorgan would still be on the hook for billions. Ummm, whoops? Do over?
MARCH 24, 2008, 9:30 AM
Did JPMorgan Chase get snagged in a legal loophole? A careful read of its guaranty agreement with Bear Stearns, part of its deal to acquire the troubled investment bank, suggests that the agreement may be much broader than JPMorgan intended. This apparent oversight likely played a role in JPMorgan's decision over the weekend to consider raising its offer for Bear. [Upped from $2/share to $10/share. Also, Bear agreed to issue more shares to JP, giving them enough of a stake to push the deal through regardless of what the shareholders want.]
Under the merger agreement, if Bear's shareholders vote down the takeover deal for a year, Bear can terminate the agreement. This we already knew. But it also appears that, in such circumstances, JPMorgan's guarantee to backstop Bear's liabilities stays in place - forever. That is, even after the rejection from Bear's shareholders, JPMorgan's guarantee would continue to apply to any liabilities Bear accrued up to the termination of the agreement. This provision could allow Bear's shareholders to seek a higher bid while still forcing JPMorgan to honor its guarantee. The guarantee would not apply to liabilities accrued after termination of the agreement. Still, as The New York Times reported Monday, the agreement may have been much broader than JPMorgan and its law firm, Wachtell Lipton Rosen & Katz,* meant it to be.
According to The Times, one participant in the negotiations described James Dimon, JPMorgan's chief executive, as being "apoplectic" as he sought to have the sentence modified.
* No relation. My father's side of my family is from Brooklyn!, but they're more likely related to the Katzes from Crim in Terry (one of the guys casing the store) or Katz (the wiretap case).
You'll never defeat my Praying Mantis style!
C's (red) friend and former co-worker cyk (brown) stayed with us over the weekend. They were comrades-in-arms, C more senior than cyk and playing the big sis role, until the end. They hit a speed bump and were able to move on, as happens between friends.
We'd never met, though she and C worked closely together and talked to each other nearly every day. The work/life divide is a strange one. We spend our most productive hours with people who are generally segregated from the rest of our life, the key portion that we consider "ours". This isn't a new phenomenon; I know I'm not offering some brilliant insight. Yet I'll always find it odd that the split is so strong. I know of C's co-workers only as vague ideas associated to names. Some of them know of me as an abstract distraction that sometimes keeps C from her work, or maybe as a recurring character in various chapters of C's "what I did last weekend" story. This split isn't universal, but it's certainly true for most people. Those who can bridge the gap often become the most cherished type of friends. Luckily, I've been able to a meet and make a few over the years.
I developed a nasty case of post-surgery cabin fever this weekend, so I wasn't my usual, welcoming self. Fortunately, I had was able to offer the Wii in my stead. cyk was a natural and proved to be a formidable opponent, especially when boxing. Actually, when boxing, cyk would better be described as some sort of beast of raging fury. She used this weird praying mantis style... I'm not sure exactly what she was doing, but she did dole out the business!
We all ate out a bunch and she and c took a trip to the East Bay and the Scharffen Berger factory to sample their sweet delights. A huge fan of all things chocolate, I think this was the highlight of cyk's visit.
Have fun wandering around Boston for a couple more weeks, and best of luck in DC. The EPA is lucky to have you.