At the Regency in Lower Manhattan, Brady rubbed elbows each morning at breakfast
with Joe Flom and the rest of the the Skadden Arps crowd, Arthur F. Long of D.F. King
and Co., Marty Lipton, Arthur Liman, Felix Rohatyn, Boesky's friend Marty Siegel, and
Joe Perella of First Boston.
Brady's LBO experience goes back to the 1985 battle for control of Unocal, the former
Union Oil Company. T. Boone Pickens and Mesa Petroleum attempted a hostile takeover
of Unocal through a complex "two-tiered" tender offer by which those shareholders
willing to help Pickens to a majority stake in Unocal would receive cash payment for
their stocks, but those forced to sell to Pickens after he had gone over the top would be
compelled to accept junk securities. In order to defend against this two-tier, front-loaded
hostile tender offer, Unocal management called in Brady's Dillon Read together with
Goldman Sachs.
Working with Goldman Sachs, Brady helped to devise a new form of anti-takoever
defense for Unocal: it was in effect a self-inflicted leveraged buyout, a self-tender for a
large portion of Unocal's stock which the company offered to buy back at a higher price
than the one stipulated in the Pickens tender offer, although Unocal would refuse to
accept any of the shares held by Pickens. Pickens tried to overturn this selective self-
tender in the courts of Delaware, but he was defeated.
The self-tender sponsored by Brady's investment bankers was actually a usurious chicken
game: Unocal's tender offer to buy 80 million shares at an astronomical $72 per share in
comparison with the $54 offered by Pickens. This meant $5.8 billion in new high-interest
junk-bond debt for Unocal, in another triumph of debt over equity. The premiss was that
if Pickens insisted on going ahead, he might very well take over Unocal, but the new debt
burden would mean that the company would soon go bankrupt and Pickens would lose all
his money. In this case, the Unocal management advised by Nick Brady was more than
willing to gamble with the existence of their entire company, and thus with the
livelihoods of thousands of workers and their families, to ward off the advances of
Pickens. In the end, this device would load Unocal with a crushing $3.6 billion of high-
interest debt as a result of the plan advocated by Brady's firm.
Nick Brady got the job he presently occupies by heading up a study of the October, 1987
stock market crash, the results of which Brady announced on a cold Friday afternoon in
January, 1988, just after the New York stock market had taken another 150 point dive.
The study of the October, 1988 "market break" was produced by a group of Wall Street
and Treasury insiders billed as the "Presidential Task Force on Market Mechanisms." At
the center of the report's attention was the relation between the New York Stock
Exchange, American Stock Exchange, and NASDAC over-the-counter stock trading, on
the one hand, and the future, options, and index trading carried on at the Chicago Board
of Trade, Chicago Board Options Exchange, and Chicago Mercantile Exchange. The
Brady group examined the impact of program trading, index arbitrage and portfolio
insurance strategies on the behavior of the markets that led to the crash. The Brady report
recommended the centralization of all market oversight in a single federal agency, the