Chapter 3 - Fernando Mercer Built an Empire Around Debt
Mercer Hospitality & Development had started with:
three roadside hotels
Fernando bought with his brother in the 1980s.
He was brilliant at:
negotiation,
renovation,
timing.
By the time Julian finished college, the company owned or managed:
hotels,
event properties,
mixed-use developments,
two golf resorts,
a collection of luxury rental villas.
Fernando loved leverage.
If a $30 million hotel could be purchased with:
$8 million equity
and:
$22 million debt,
he saw the debt as:
efficient.
For decades, it worked.
Then the company expanded too quickly.
Two large resort developments started just before construction costs rose sharply.
Interest rates increased.
One hotel opening was delayed nearly:
eleven months.
Another project lost its senior lender and required expensive bridge financing.
By the time Julian and I got engaged, Mercer Hospitality had valuable assets but:
too much short-term debt.
Fernando needed:
time.
Grant Ridge specialized in exactly that problem.
Longer-duration private credit.
Preferred equity.
Recapitalizations.
Fernando approached my father.
Dad said:
“No.”
At first.
Not because of:
Julian.
Because family relationships and investments should be separated where possible.
Fernando kept pushing.
Eventually, Grant Ridge’s investment committee agreed to:
review the opportunity.
Not fund it.
Review.
Fernando wanted:
$120 million
across a refinancing package involving multiple Mercer entities.
My father recused himself from the investment vote.
I had no role.
Grant Ridge brought in:
independent counsel,
valuation advisers,
Harper Keene forensic accounting
because the Mercer structure contained:
dozens of intercompany transactions.
That was normal for a complicated family business.
Fernando treated it like:
insult.
Julian said:
“Dad hates anyone looking under the hood.”
I laughed.
I should have paid more attention to:
May you like
why.
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