Chapter 822 – Mortgage Loan
A Microsoft shareholder wants to use his shares as collateral for a loan? Citibank will surely welcome it. Loan interest is one of the banks’ primary source of income.
Of course, the banks must consider the repayment ability of the other party, the value of the collaterals, etc.
Shares are something that has risks. In the late 1980s, other than Japan, the US was one of the first countries that have a property crisis. During that time, the US avoided the crisis because of the rise in its technology and war. But Japan was not so lucky. Japan’s economic crisis will need at least 10 years to recover.
During that period, all banks suffered losses from shares and property mortgage loans. Donald Trump was one of the people who owed banks a large amount and threatened the banks to lower their interests.
Some people just declared bankrupted. Their shares had become worthless, and the banks could not recover a single cent.
After that period, the banks imposed harsher regulations on their risk assessments. Therefore, Feng Yu’s shares can only get a loan lower than the share’s current market value.
Feng Yu also knows that the loan amount will be lower than his shares’ market value. But when Myers told Feng Yu about the loan amount, Feng Yu was not very happy.
“Myers, I am using Microsoft shares as collateral for the loan. Don’t you all know the profitability of Microsoft? The value of the shares will surely rise this year. Why is there a risk of depreciation? The contracts signed between Microsoft and those PC manufacturers is worth how much? Moreover, Microsoft’s office software and servers’ sales are doing so well now. The shares’ value will surely go up!” Feng Yu frowned.
Damn! How many Microsoft shares am I using to get this loan? The market value of these shares is worth at least 1.5 billion USD, and even 1.2 billion loan is considered too little. You are telling me that you can only give me a 700 million USD loan?
You are telling me that Microsoft’s shares have the risk of depreciating 50% within 3 years? What bullshit?!
“Mr. Feng, please calm down. Share prices are volatile and have fluctuations. Our risk assessment might be harsher, but I hope you can understand.” Myers replied.
“I don’t understand. I only want a loan of 1.2 billion USD with these shares. Is it a lot? The value of these shares is at least 1.5 million USD! You all will also be charging interest for this. Is the loan amount huge? Next year, the value of these shares might double. Your risk assessment team cannot even see it?”
1.5 billion worth of shares can only get a 700 million USD loan? This is too ridiculous! If Citibank insists on this amount, Feng Yu will get a loan from other banks. But he is Chinese and could not enjoy the super low-interest rates given out in Japan. If not, he will get a loan from the Japanese banks!
“I’m sorry, Mr. Feng. These are the regulations in our bank now. If you want to increase the loan amount, the value of your collaterals must also increase.” Myers also want to issue a higher amount of loan to Feng Yu. But Feng Yu was only using a portion of his Microsoft shares as collaterals for the loan. If he can make Feng Yu use all of his shares to get the loan, the proportion of the loan amount will not be so low!
Myers’s performance is gauged by the loan amount issued out. The more loans he gave out, the higher his bonuses were.
Myers thought by giving such a low amount, and after much persuasions, Feng Yu will surely increase the number of Microsoft shares, and he will increase the loan amount slightly higher.
But what Myers did not expect was Feng Yu stood up suddenly and walk off.
“Mr. Feng, our Citibank’s loan conditions are the same as other banks. You will not get better offers in any New York banks.” Myers shouted. “If you are willing to increase the number of shares, I will increase the loan amount.”
Feng Yu did not say a word and walked out of Myers’s office.
Myers panicked. Feng Yu had left without hesitation!
What Myers said was partially true. All the banks in New York have a strict evaluation of shares used in loans. The proportion of loans and shares is very low.
But Feng Yu was not using any company’s shares. He is using Microsoft shares, the fastest-growing software company’s shares sought after by all investors. The proportion will not be so low!
Myers watched Feng Yu left and immediately called a few banks’ top management staff, who were close to him. Although they were competitors, sometimes they will work together.
For example, now. Myers successfully convinced the other banks to cooperate to lower Feng Yu’s personal loan amount. He wants to teach this Chinese man a lesson. Of course, the condition he offered to the other banks was to give Feng Yu the loan together if he agrees to the amount.
Those bankers agreed, but Myers was not sure if they would keep to their words. Those bankers were secretly hoping Feng Yu will contact them, but to their surprise, Feng Yu did not contact anyone of them.
All the banks panicked. They quickly contact Feng Yu and their roles switched. The bankers are willing to increase the loan proportion, and they know the higher-ups will agree. No one believes that Microsoft shares will depreciate!
But when the bankers contacted Feng Yu, they were rejected even though the loan amount was increased.
Myers also could not sit still. He called Feng Yu and told him that he had seen the amount wrongly. The loan amount Feng Yu can get from using his Microsoft shares is not that low. The higher-ups in Citibank had agreed to increase the loan amount to 1.2 billion USD.
Feng Yu sneered. “They agree to the amount? But I do not want to get the loan from your bank now. Also, Mr. Myers, I will speak to your bank’s Chairman about this. I think you will be in trouble.”
Myers was shocked. He realized that it was a mistake to treat Feng Yu like any other person. If the Chairman knows about this, the board of directors will surely fire him. He will not be able to get such a high-paying job elsewhere.
Myers is the only one in the top management that did not receive any incentive shares. He had wanted to use Feng Yu’s loan to increase his performance and get some incentive shares at the end of the year. But now, not only he will not get any incentive shares, he might even lose his job!
“Mr. Feng, I think there are some misunderstandings between us. I would like to explain to you personally.”
“No need. I am not free for your explanations.” Feng Yu had a smile on his face.
This Myers really thought Citibank is powerful? There are so many banks in this world. If Citibank refuses to give me a loan, you think the other banks will do the same too?
Feng Yu had already gotten a loan from HSBC. It is a low-interest loan of 1 billion USD. The Microsoft shares used as loan collateral is only worth 1.1 billion USD. This was a vast difference from what Citibank offered.
Of course, the loan got approved was also not because of Microsoft shares. It was also because Li Zekai and Fu Guangzheng were Feng Yu’s guarantors. Feng Yu will continue to use all his Microsoft shares to get loans and invest everything in the US stock market.
As for Myers, that’s a lesson he will never forget for the rest of his life!
