[Conference room, Carrington & White — October 22, 2012, 9:15 AM]
Imogen's voice came through the speakerphone with the specific clarity of someone who had been on these calls so many times that the acoustic reduction barely registered as a limitation.
"The Treasury counsel's draft is on page seven. The restricted-activity clause is broader than what you outlined."
Cross had the draft in his hands. He was sitting very still. He had arrived at the conference room twenty minutes early, which was Cross's way of managing a situation that felt outside his control — he could not control the outcome, so he controlled the arrival time.
I was reading page seven.
The mitigation terms Treasury was requesting were, in principle, what the Composite Strategy had anticipated: reporting requirements, a modified ownership structure that addressed the security concern, and a monitoring framework for the deal's first three years. In principle, manageable.
In practice, the restricted-activity clause on page seven went four paragraphs beyond what the Composite Strategy's force majeure argument had been designed to address. It required Cross to seek prior approval for any sub-contract that touched infrastructure within thirty miles of a sensitive facility — which, given the scope of bridge and road work in the tristate area, was effectively a blanket prior-approval requirement on any project Cross wanted to expand.
The CFIUS-as-force-majeure argument had produced the mitigation framework. It had not produced the framework I needed.
I converted $1,000 to LP. The banking app took eight seconds to update, and when it did, the number was $40.
I looked at the number for one second. Not long enough to sit in it, long enough to know it.
$40.
The conversion had been $1,000. The LP came in at 10. The purchase quality was thin and slightly wrong and entirely functional, which was what it always was, and the $40 was a fact about the world that I was going to have to live with and manage.
Okay. Work the problem.
LP: 10.
The Library ran the mitigation analysis. What was Treasury's actual minimum — the floor beneath the floor? The restricted-activity clause was a negotiating position, not the security concern itself. The security concern was the sovereign wealth fund's minority stake in the London counterparty, which touched the infrastructure project near the sensitive facility. Treasury needed the concern addressed, not the entire contract restructured.
The Library cross-referenced the CFIUS precedents from Soto's matter and the novel construction from the Cross CFIUS brief. The Composite Strategy's brittleness was visible: the force majeure framing had gotten the deal to this table, but the framing was straining under pressure from Treasury's counsel who had correctly identified that a CFIUS review was not a legal bar to performance, only a prudential reason to pause. The argument was not broken. It was showing its edges.
"The restricted-activity clause," I said. "Treasury is trying to solve a problem that isn't the security concern."
Imogen was quiet on the phone. Imogen on speakerphone had a specific quality of attention that was readable even through the acoustic reduction.
"The security concern is the sovereign wealth fund's stake," I continued. "The clause on page seven is a structural solution to a risk that doesn't require structural remediation. Treasury wants certainty that the project won't become a security vector. They can have that certainty through enhanced reporting on sub-contractor national-origin status — which is a narrower instrument than prior approval on every sub-contract."
The Library flagged the pivot in gold: #composite-strategy: brittle edge avoided. Narrower instrument = lower resistance from Treasury counsel.
I gave Cross the version he would say out loud.
He listened. He picked up the pen. He set it down. He picked it up again.
"You're telling me to offer them something different than what they asked for."
"I'm telling you to offer them something that solves the problem they actually have, which is not the same thing as what they drafted."
"And if they don't take it."
"Then we negotiate from there. But they will take it, because the alternative — extended mitigation negotiation while your financing window closes — is worse for Treasury than accepting a narrower instrument that actually addresses their security concern."
"How much time do I have."
I looked at the calendar. Monday. The financing window closed in eleven days. "You have eleven days and one morning."
"That's not a lot."
"It's exactly enough if Treasury accepts the modified offer by end of this week."
He looked at me. He looked at the speakerphone. He looked back at me.
"Imogen," he said.
"The modified instrument is cleaner from an arbitration record perspective," she said from the phone. "If CFIUS accepts it, the arbitration record shows a de-escalated national security concern rather than a structural remediation, which strengthens the performance-obligation argument in the final award."
"You've already talked about this," Cross said.
"We hadn't until just now," I said, which was true. The pivot had emerged from the Library's analysis in the last seven minutes.
Cross looked at the draft on page seven. He turned the pen over once.
"Draft the modified offer," he said. "I'll review it before four PM."
He stood. He picked up the draft and his coffee, which he had not touched. He walked to the window and looked at the London street below.
"What's your confidence level," he said, without turning around.
"On the modified offer being accepted?"
"Yes."
I looked at the Library's model. The Composite Strategy had a 52% probability of full acceptance, 31% probability of further negotiation from a better starting position. Those were good numbers for a novel construction that was four weeks old.
"Sixty percent chance they take it this week," I said. "Thirty percent they push back but settle before the window closes."
"And ten percent."
"Ten percent is everything runs out of time."
He nodded. He was still looking at the window.
"Draft the modified offer," he said again.
I drafted the modified offer.
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