The Rhodes show goes on and on

By Neil Osborn

Restructuring Latin America debt is no ordinary job. Yet it’s fallen to a man of seemingly ordinary persuasion: William Rhodes, conventional, quiet, a jogger and cigar smoker. He isn’t one of the fastest movers at Citibank, where the true high-fliers are more than senior vice-president at 48. He probably isn’t the superman that some American journals have dubbed him. But the very fact that Rhodes is unextraordinary has allowed him to achieve something that might have eluded a more colourful and original banker.

This achievement is not merely Rhodes' simultaneous chairmanship or co-chairmanship of the advisory committees for restructuring Mexican, Brazilian, Argentinian, Peruvian and Uruguayan debt. It is the additional feat of demonstrating to the world a better way to reschedule debt – an improved method that takes at least some of the tears out of this most trying of banking exercises. Thus Rhodes has earned a little footnote in banking history.

It was the period between June 1983 and January 1984, when Phase II was signed, that demonstrated Rhodes' skills most clearly. Using an array of simple techniques, Rhodes managed to bring a $23.5 billion deal, including $6.5 billion of new bank loans, through to a conclusion. That may not read like very much now, but persuading hundreds of reluctant banks to make additional advances to Brazil seemed almost impossible at the time. Rhodes said recently: "People doubted we could get $5 billion new money, never mind what we did get." Even Brazilian finance minister Ernane Galveas, not a man much given to praising bankers, was impressed: "He is a hard worker. He's done quite a good job," he told Euromoney shortly after the Phase II signing.Rhodes, a Brown University graduate, worked his way up in Citibank to become senior corporate officer of Latin America. As such, he was called upon to lead rescheduling efforts for Jamaica and Nicaragua some time before the Mexican crisis of 1982. So when the Mexican government announced in August of that year it could not pay its debts on time, Rhodes spearheaded the rescue work, partly because of his previous experience. By the time a $27.5 billion rescheduling package had been completed in mid-1983, Rhodes had already collected most of his other chairmanships. The last of these fell to him in June, when Phase I of the Brazil rehabilitation partly failed (Euromoney, October 1983).

Rhodes made his most important decision first – he moved very slowly. Where another man might have been tempted to construct a financing package as quickly as possible – the world’s banking system, after all, was at some risk – Rhodes deliberated like a general before a campaign, which is rather how he thinks of himself. "Liddell Hart, [the war historian] wrote a book called 'Strategy'. This isn't much different, you must plan the thing out," Rhodes said last month in his first interview since Phase II.

Rhodes made a number of important moves. For example, many banks had complained during Phase I that they were starved of economic data, so Rhodes established an economic sub-committee to feed them statistics. It was also decided to attempt to raise enough money to carry the Brazilians through to the end of 1984, rather than opt for a smaller package that would last only a few months. This became a useful sales tool when Rhodes and his team were pressing banks later – pay up now and you won't be bothered again until 1985, institutions could be told.

Rhodes also pulled as many banks as possible into the rescheduling process, to try and make them feel they were helping to shape events, rather than standing idle waiting to be asked for money. To placate the regional banks, which had been upset during Phase I, Rhodes appointed several of them to the coordinating committee. (This committee is beneath the 14-member advisory committee of which Rhodes is chairman). Rhodes then arranged for Manufacturers Hanover, favourably regarded by many regionals because of its large correspondent banking business, to liaise between the advisory committee and the small banks, Rhodes also secured Guy Huntrods, director of Lloyd's Bank International as a deputy chairman of the advisory committee, to avoid any impression that American bankers were in total command. "The Europeans knew they had a strong voice in what was happening," said Rhodes.

Once meetings had begun to piece together the details of the package, Rhodes maintained a slow but steady pace. To each irritating little problem – difficulties caused by different regulations on non­performing loans for banks in different countries, for example – Rhodes listened patiently. "Bill let everybody put their two cents in. There's a lot of posturing in these things, and he allowed that," said one committee member.

Every now and again, Rhodes cut the flow of words, however important its role in reducing the acrimony that attends rescheduling. "He would say, 'That's a point that bears thinking about,' and then he'd go on to the next thing,'' said one observer of these events. Such incidents demonstrate another quality that served Rhodes well: a single-minded determination to reach his goals. "Bill is a bulldog. Once he's made up his mind to go in a certain direction, heaven help him, he's going,'' said one friend.

This mixture of determination and mild manners helped Rhodes draw in a wide range of players. By October, he had an enthusiastic team working with him. Morgan Guaranty senior vice president Leighton Coleman, deputy chairman of the advisory committee, for instance, appears to have been inspired. "Leighton isn't normally very effusive. He doesn't like talking to people," said one Morgan officer. "But he was in there pitching with Bill, speaking to the bankers, participating in the press briefings." At a pre-signing dinner in January, William Dale, deputy managing director of the International Monetary Fund, who was deeply involved with Phase II, said: "I think we all thought from time to time we were working for Bill Rhodes."

Rhodes was just as effective explaining matters to banks outside the committee, soothing and cajoling bankers who didn't want to lend another penny to Brazil and who blamed New York bankers for luring them into Latin America in the first place. "There's a prejudice among smaller institutions against big city bankers who call up for things,'' said Leonard Caldwell, executive vice president of First Pennsylvania Bank in Philadelphia. Rhodes even managed to sound sympathetic towards regional bankers: "He gave the impression he cared."

Rhodes' habit of speaking his mind where others might have dissembled, might also helped win over bankers who disliked the officers from the money centre institutions that had led them into Latin America. “Rhodes is completely straight,” said Huntrods of LBI. “No one can ever say they don't know where they stand with him.” 

But it wasn't sufficient to win allies – Rhodes had to use them. Arab Banking Corporation, for example, was asked to sit on the platform at an information meeting in Bahrain, in the hope that other Arab banks would feel more comfortable if they saw that ABC was associated with the loan. Bank of Tokyo was used in the same way in Asia. Official institutions were also used as much as possible: Swiss National Bank in Zurich, the Bank of England in London.

All these manoeuvrings were part of the game Rhodes was playing. By moving purposefully from meeting to meeting, according to a fixed schedule, as though he were executing a pre-ordained plan, he helped to create a sense of calm. He explained: "There were banks that were a little panicky; reading in the newspaper that the world was falling apart. You had to give off an air of tranquility and an impression that there's an organized plan. If you appeared to be running around haphazardly, it would have been like putting gasoline on a fire."

Nor would it be right to suggest that Rhodes, for all his organization and determination, made Brazil or any of his other reschedulings an entirely easy or pleasant process. The grinding and monotonous work still had to be endured, just as it did in the negotiations over Poland and International Harvester.It would be wrong, of course, to make too much of all this. The Brazilian package Rhodes pieced together was, for instance, a little less formidable in some respects than the deal attempted in Phase I. The Phase II architects, to take one detail, contented themselves with $6 billion of interbank deposits, instead of $7.5 billion. More importantly, Antonio Gebauer and Gerard Finneran, the Morgan Guaranty and Citibank officers who led Phase I, were working largely without aid from central banks and official institutions, something Rhodes had in abundance. ''There was precious little political support for us anywhere in the world,'' complained one senior Phase I veteran. "We thought that we could do the deal through bankerly cooperation. It wasn't possible."

A legion of lawyers still fretted because the wording of tiny clauses in the loan agreement diverged from the language in the loan documents their banks had signed with Peru or Brazil years ago. It still took a never-ending stream of calls by Rhodes and dozens of other bankers to bring banks into the loan. Said one player: "You have to pick up a phone cold and convince an officer to lend money. If you get no loan from him, you go to the senior vice president and the president. Then you mention it to the Federal Reserve. You do it day after day, with people taking their hostility out on you. But you have to keep driving, you have to drive the loan through by force of personality."

The advisory committee chairman got a particularly thorough drubbing. He sits, after all, in the middle between bankers and borrower, trying to act as honest broker. This can mean hounding a finance minister to concede a point one moment and then hounding the bankers to compromise the next. "There are times when the chairman has to tell it like it is and deliver unpleasant messages in both directions. That isn't easy," said Donald McCough, executive vice president of Manufacturers Hanover.This process takes its toll. Bankers go without much rest. "I've only had 10 days vacation in the past two years,'' Rhodes said sadly in February. Participants carp about little things. "Citibank has served the same sandwiches to the Argentine committee every day since December 1982," said one source. "Chicken curry on pita bread, steak on French bread, turkey and tomato on pumpernickel.'' Other bankers become slightly hysterical: one talked for more than an hour about the unremitting work involved in rescheduling, apparently unable to stop himself.

The pressures are multiplied, of course, when a banker chairs more than one committee at one time – the travelling and sudden emergencies would submerge lesser mortals. Last autumn, for instance, Rhodes was in Hawaii at the American Bankers' Association meeting as the first stage in a round-the-world trip to sell the Brazil loan to banks. But suddenly he had to abandon his plan to fly back to New York and his Argentine committee, which was in an uproar because of the arrest of the Argentine central banker, Julio Gonzalez de Solar.

Recognizing that this kind of incident had become part of Rhodes' routine, his Citibank colleagues recently presented him with a fireman's helmet, which he keeps on display in his office.

Worst of all, bankers running rescheduling can occasionally lose friends. Pressing a fellow banker to participate in a Third World loan does not necessarily help to cement a relationship. Moreover, membership on a rescheduling committee can also cause an officer trouble inside his own institution. "If I lose a relationship for my bank because I leant on a correspondent too hard over Brazil, you can bet I hear about it from the people in the correspondent banking department," said a Phase II committee member.

So, unfair though it might seem, one of the harvests Rhodes will reap for his labours in Latin America will probably be the undying hostility of some of his fellow bankers. The majority, certainly, will remember him as a sort of banking hero: an unflamboyant, bespectacled figure, calmly steering his way through a series of negotiations of unparallelled complexity and importance. But that won't be quite everyone's image. "Some people," predicted a friend, "will never talk to him again."