Template:South African CLN
The South African credit-linked note and the misunderstood sw-æp
It was decades ago, a mild Friday evening in the infancy of the credit derivatives market. It was all to do with a secured note, credit-linked to the republic of South Africa. I had drafted it — elegantly, if I do say so myself — and faxed if off, as one did in those days, to our client, a giant investment bank, and the prospective purchaser. The week’s work done, I was putting my blazer on and groping for my brolley when the phone rang.
I turned on my heels and regarded it resentfully. Should I answer?
Valour got the better part of discretion, and I did. It turned out to be a partner from that famous derivatives firm[1] Stephenson Harwood. He announced himself as the prospective client’s solicitor, and told me he had some comments on the swap. Only he pronounced it “sw-æp”, to rhyme with “crap”, and not “sw-ŏp”, to rhyme with chop — something that after Noel Edmonds, you would think no self-respecting British child, let alone one who had matured into a derivatives whizz, would ever do.
In any case this chap sent in his mark-up of the, er, sw-æp, and he had rather gone to town on it, in a manner indicating only a passing acquaintance with the derivatives market, but great expertise in the complications that arise when one transports goods by sea.
My supervising partner in those days was an excitable fellow[2]. I confess it was with a guilty glee that I trotted around and dropped the comments — they were compendious as they were ill-informed — on his desk, the way an obstreperous child might drop a match into a canister of petrol. It had the anticipated effect. Whilst the young JC was patiently explaining this setback to our client, represented by a callow but quick young fellow from Dublin in his first year out from Trinity College.
“I have never been so outraged”, said my supervisor, his face a deep puce. “I have covered his draft with unprintable words! Obscenities! Words starting with “c” and “p” ...!”
There was the most exquisite pause before the young Irishman on the speakerphone interjected: