S&P Overpromised and Overdelivered

Programming note: Money Stuff will be off for the rest of the week. Happy Thanksgiving!

When I was an investment banker, one thing that I did was pitch convertible bond offerings to companies. A coverage banker — an investment banker whose job was to know companies and advise them on financial topics — would bring me to a meeting with the chief financial officer of one of her companies to talk about convertible bonds. And I would come in and say “the convertible bond market is hot, you should do one, we think you could raise $200 million of 5-year convertibles and pay 2% interest with a 30% conversion premium.” Most of the time, their eyes would glaze over and they’d nod politely and say “thanks for that, very interesting” and move on with their day and not do a convertible. But sometimes they would say “oh yes we do need $200 million and those terms sound attractive, let’s do it next week,” and then we’d do some business and earn some fees. And that is life as a product banker.