Bruce S. Guo's encounter with Nicole Kidman was always going to be a beautiful dead end.
The next morning, he filed the memory away in a quiet corner of his mind, put on a tailored suit, grabbed the documents he had prepared, and drove to Merrill Lynch's Los Angeles office.
As one of Wall Street's five major investment banks, Merrill had a sterling reputation. It was also the largest securities and equity underwriter on Wall Street, with a financial distribution network stronger than any other bank in the world. That was one of the main reasons Bruce had chosen them.
And like any top-tier investment bank that catered to CEOs, founders, and high-net-worth clients, Merrill's LA office was exactly what you would expect. It occupied an entire floor in the Pan Am Building, the tallest tower in Los Angeles, and the interior was polished, expensive, and unapologetically elite. That was not vanity. In finance, presentation mattered. If your office looked cheap, nobody with real money would take you seriously.
After checking in at reception, Bruce was led to a meeting room.
A few minutes later, the door opened, and a middle-aged white man in a black suit walked in. He had a slightly receding hairline and wire-rimmed gold glasses.
Bruce recognized him at once.
Danny Lewis, head of Merrill Lynch's Los Angeles office.
"Mr. Guo, welcome."
"Thank you."
Lewis stepped forward, shook his hand, and gave Bruce a careful look.
"I have to say, I did not expect the author of Pirates of the Caribbean, Fantastic Beasts and Where to Find Them, and Fifty Shades of Grey to be this young. By the way, before you leave, I'll need an autograph. I'm a genuine fan, especially of Pirates of the Caribbean."
Bruce smiled.
Whether Lewis meant it or not, the line was well delivered. Most people liked hearing praise, and Bruce was no exception.
"I appreciate that, Mr. Lewis. The autograph won't be a problem."
"Excellent. Please, sit."
They took seats across from each other.
Lewis got straight to the point.
"What kind of business are you looking to do with Merrill?"
Bruce opened his briefcase, took out a file envelope, and slid it across the table.
"Please take a look at this first."
Lewis opened it and pulled out the documents inside. He only skimmed the first few pages before his eyes sharpened.
"I had no idea your books were performing this well in the market."
When he looked up again, there was genuine surprise in his voice, and something sharper in his eyes.
Bruce gave a calm nod.
"The documents in your hand were issued by Thornbird Publishing and carry full legal force. The sales figures for every title are accurate."
"We have no issue with the validity of the documents," Lewis said. "What I'm more interested in is what you want to do with them."
Bruce smiled faintly.
"I think you already know."
He leaned forward slightly.
"I want to securitize the next ten years of copyright and derivative income from these five properties and issue $350 million in asset-backed securities through Merrill."
Lewis paused.
"Three hundred fifty million dollars?"
Bruce could see the resistance immediately.
The idea itself did not surprise Lewis. Earlier that year, rock star David Bowie had completed a landmark securitization deal backed by royalties from 300 songs. Moody's had rated those securities A3, the deal had raised $55 million, and it had opened the door for artists, writers, and other rights-holders to turn future royalty streams into tradable financial products.
So the structure was not the issue.
The size was.
Bruce pulled out a second file and handed it over.
"These are the current financial numbers for all five titles."
Lewis took it.
Bruce spoke while he read.
"The Pirates of the Caribbean trilogy has been on the market for eight weeks and has already sold 1.94 million sets. At a retail price of $45 per set, that's generated $87.3 million in gross revenue."
He tapped the next line.
"The Fifty Shades of Grey trilogy has also been out for eight weeks. It has sold 2.86 million sets and is still climbing at roughly 350,000 sets a week. At a total retail price of $48 per set, it has already produced $137.28 million in revenue."
He moved on without slowing down.
"Fantastic Beasts and Where to Find Them has sold 4.25 million copies in the same eight-week period. At $20 a copy, that's another $85 million."
Then the fourth title.
"The first National Treasure book, The Declaration of Independence, has been out for six weeks and has sold 2.33 million copies. At $16 each, that's $37.28 million."
And finally:
"Paranormal Activity has been out for three weeks and has sold 890,000 copies. At $10 a copy, that's another $8.9 million."
He let that sit for a second.
"Together, those five properties have already generated $405.76 million in gross revenue."
He looked directly at Lewis.
"As the author, my contract gives me a 15 percent royalty share. That means I'm entitled to $60.864 million before tax. After the top federal personal rate of 35 percent and California state taxes at 4.92 percent, my take-home comes to roughly $36.519 million."
He leaned back slightly.
"So when I ask to issue $350 million in ABS against the next ten years of income from those same five properties, with a fixed annual yield of 6.48 percent, I do not believe I'm asking for anything unreasonable."
Lewis read through the numbers carefully before answering.
"Mr. Guo, I agree that your books are exceptionally strong. And books do have meaningful long-tail value. But our concern is simple. Five or six years from now, when the initial heat is gone, how do investors get repaid?"
Bruce answered without hesitation.
"Mr. Lewis, you already know the answer. Book royalties are only one piece of a property like this. The real money comes later, in film adaptations and merchandise. Those revenue streams can dwarf publishing income."
Lewis shook his head.
"I'm sorry, but at this stage, the only income stream we can underwrite is the royalty stream we can verify. Film adaptation revenue and merchandise revenue are still speculative. There isn't enough financial history or independent market support for us to use them as collateral in a securities offering."
He paused and watched Bruce, whose expression had barely changed.
Then Lewis continued.
"Unless you're willing to accept a higher rate, it will be difficult to place this paper in the secondary market."
That was the real issue.
In the United States, debt markets were larger and more central than equity markets. Companies often raised capital by issuing debt, not by going public. Bruce was doing the same thing here, using future income as collateral to borrow now.
At 6.48 percent, the yield was already about 50 basis points above the U.S. ten-year Treasury. More importantly, these securities would be backed by his future rights income, and given his sales trajectory, the risk was hardly extreme.
But from Merrill's perspective, a higher coupon would make the bonds easier to sell, more attractive to institutions, and more profitable for Merrill itself. If the properties kept performing and the bonds tightened later, Merrill could potentially make even more trading the paper.
Bruce looked at him.
"What rate are you hoping for?"
Lewis did not hesitate.
"Eight percent."
Bruce gave a cold smile, then stood up.
"In that case, maybe I should be talking to Morgan Stanley or Goldman Sachs."
He said it casually, but he meant it.
Merrill was his first choice, not his only option. Wall Street had five major investment banks, and beyond them there were countless commercial banks and financial firms active in structured products. Bruce had no shortage of alternatives.
He gathered his papers and slid them back into his briefcase.
"Mr. Lewis, I appreciate your time. I hope we'll have a chance to work together on something else."
He turned and walked toward the glass door.
"Mr. Guo, one moment."
Bruce stopped and looked back.
"6.48," he said flatly. "If Merrill insists on pushing the rate higher, there's nothing left to discuss."
The finality in his tone made Lewis frown.
Whatever he thought of the rate, he was not willing to let a $350 million deal walk out the door without a fight.
"We would need to conduct a full risk review on the five properties before agreeing to your terms."
"That's fine," Bruce said. "How long?"
"One week."
Bruce shook his head immediately.
"Too long."
Lewis held his gaze.
"We can give you an answer within one week, but you'll need to sign an exclusivity agreement. Until our review is finished, you cannot bring this transaction to another bank or private investor."
Bruce considered that for a moment.
Then he answered.
"I'll sign exclusivity, but only for three days. If Merrill Lynch cannot complete a risk review in three days, then I need to seriously reconsider whether your firm is worth working with at all."
Lewis frowned again.
He could tell Bruce was not bluffing. If he pushed too hard, the kid would walk straight into Goldman or Morgan Stanley.
And Lewis's instincts, plus the numbers Bruce had put on the table, told him this was a highly profitable deal. The 6.48 percent coupon was not low. Three days was painfully tight, and the review might not even be complete by then, but it was still better than losing the business outright.
After a few seconds, he nodded.
"On behalf of Merrill Lynch, I accept your terms."
Bruce nodded back, though inwardly he let out a long breath.
The deal was not done yet.
But it had started well.
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