Another week, another episode in the perils of that ill-starred Canadian company, Massey-Ferguson Ltd. “Pauline is on the tracks,” says Conrad Black, chairman of Argus Corp., Massey’s largest shareholder, “and you can hear the train.” But as the unhappy chronicle of the century-old farm machinery manufacturer escalated into a monumental cliff-hanger last week, it was not at all certain that a hero would emerge to cut her loose.
Massey’s cries of distress to federal, provincial and foreign goverhments, though no surprise to insiders, put a swift end to all the brave talk that has emanated from the company since Black and Victor Rice, the president, plucked it from the jaws of bankruptcy two years ago. Under their inspired direction, Massey slashed its international work force by close to one-third, hacked off unprofitable assets involving write-downs of $600 million and even managed to chalk up a modest operating profit in 1979.
Those halcyon days were short-lived, however, and beginning late last fall everything that could go wrong for the company did so. Interest rates zoomed, the bottom fell out of the North American farm machinery market and the soaring British pound crippled export sales of Perkins Engines, once its strongest subsidiary. As losses mounted, so did Massey’s already crushing debt load. In the latest ninemonth period ending in July, bank borrowings were up $458 million over 1979 and total debts have risen to a staggering $1.7 billion. But the public alarm bell was not sounded until last week, when Massey announced that it could not meet conditions imposed by debtlenders for the second year in a row. Unless the terms are renegotiated by Nov. 1, the cash-starved company could go bankrupt.
Despite the apparent urgency of the situation, governments are regarding it skeptically, promising no decision before the end of the month. In part, politicians are still not convinced that Bay Street investors can’t put up the cash. While trying to remain supportive, they want to make sure they are needed and not being taken advantage of. But
without government support, most investors are simply too leery of Massey to jump into a proposed $600-million issue of preferred shares, which Black says would put the company back on its feet. Not that he blames them. “Obviously from an orthodox point of view,
it’s insane. But if investors had the same intimate knowledge of the company that I do, they wouldn’t consider it so risky. It’s a case of so near and yet so far.” Still, the only takers to date are Black’s Argus Corp., which owns 16.4 per cent of Massey’s stock, and the Canadian Imperial Bank of Commerce, which has close to $400 million in loans
to Massey. They have agreed to contribute up to $250 million Cdn., but only if outside investors make up the other $350 million and if worldwide debt is restructured. If Massey does not raise the cash, says Black, it will be at the mercy of its 250 international lenders, “only six or seven of whom have enough at stake that they can’t say no.”
Even if government officials believe this scenario, however, they will not necessarily intervene to prevent it. To some, the recent guarantee of $200 million in loans to Chrysler Canada Ltd. was bad enough; a Massey rescue could open the floodgates to government bailouts. Although its head office and the majority of its shareholders are Canadians, Massey has only a fraction of its worldwide sales and assets (each more than $3 billion U.S.) in Canada, and only 6,000 of its 47,000 employees. (By comparison, Chrysler had 14,000 employees before the layoffs of the past year.) Finally, not everyone is convinced that the equity package will, in fact, save the company or be anything more than a free ride for investors.
Anxious to disassociate himself from any such connotation of freeloading is Conrad Black, who insists that while Massey may have “dollar signs in its eyes ” he, as an outside director, is only asking for “favorable noises” to reas-
sure lenders and supply momentum to fund-raising schemes. Having written down Argus’ investment in Massey to zero and resigned the Massey chairmanship in May (“It was a relief to get out of there. It was not exactly a tranquillizing experience”), Black is now devoting himself to the more delectable pursuit of building up his resource-rich Argus empire. “I am afraid it will be disillusioning to some to know that I don’t have a cent in the place and it doesn’t matter to me financially what happens.”
Compared with his more toughskinned corporate colleagues, Black is
extraordinarily sensitive to the criticism that he has abandoned Massey or that he hitched his wagon to its success and failed. Instead of paeans of praise, which have come for his prodigious achievements with Argus, he hears gloating in the corridors of Bay Street. “I am amazed by the number of socalled financial experts who are luxuriating in the view that I am some sort of a punch-drunk prizefighter on the ropes. Well, screw them.” Black argues that he has done more for Massey than the previous generation of owners or managers, who are largely to blame for its present woes, and that he never
promised to work miracles. Maybe not, but Black basked in the glow of media idolatry that followed his take-over of Argus two years ago, and now one suspects he misses it. Though no lover of journalists, he seems almost hurt by the fickleness of their favors, taking refuge in the faith that history will judge him more fairly. “I know what’s going on at Massey. Either we lose nothing, or we, along with other investors, make a lot of money. Now you tell me if that’s flash in the pan.” With an eye to both future and past he adds: “I am a historian by vocation, and by that bar I will be judged.”
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