Nelson Bunker Hunt and his brother, W. Herbert, told congressional committees yesterday they are three-quarters of a billion dollars in debt as a result of their silver speculating spree, but they don't know yet whether they made or lost money on the deal.
The Hunts testified they may be able to minimize their losses with the help of a $1 billion bailout loan from a group of banks, arranged with the blessing of Federal Reserve Board Chairman Paul A. Volcker.
The loan will let the brothers keep their millions of ounces of silver, rather than force them to sell it now. Selling the silver immediately could drive down prices, causing heavy losses for both the Hunts and the banks and brokers to whom they owe money.
Nelson Bunker Hunt testified he has silver speculation debts of about $350 million and W. Herbert said his obligations to come to about $400 million.
Bunker and Herbert's debts are so great that they are getting financial help from their brother Lamar, owner of the Kansas City Chiefs professional football team.
Lamar is a partner with Bunker, Herbert and the Hunt family-owned Placid Oil Company in a new partnership formed to pay off the silver speculation debts. Lamar has no silver debts of his own. "He's helping out his brothers," said family lawyer Ivan Irwin of Dallas in an interview.
The new partnership will assume Bunker's and Herbert's silver debts and pay them off with money borrowed by Placid Oil from the group of banks.
The banks have agreed to make the loan, but the amount to be borrowed has not been determined. It will be between $800 million and $1.6 billion. The loan will be for 9 years and will carry an interest charge of 1.5 to 2 points above the prime lending rate, now 18.5 percent.
Details of how much the Hunts owe and how they plan to pay it back emerged piecemeal in more than five hours of hearings before two congressional committees. Rarely does Congress -- or anyone else -- learn so much about how some of the richest people in the world manage their finances.
Bunker and Herbert repeatedly testified they didn't know how much silver they own, don't know how much they are worth, or how much they made or lost on silver.
Asked by Sen. Robert Dole (R-Kansas) about how they came out of the silver rollercoaster ride, Herbert Hunt answered, "In all seriousness I don't know the answer to that."
Replied Bunker, "I'm really not sure what my position is." Earlier in the day, Bunker responded to a question about his net worth by saying, "There's an old saying that anybody who knows how much he's worth can't be worth very much."
Asked at one point to estimate his silver debts, Bunker said he "guessed" they might be about $200 million. Moments later, his lawyer corrected him, telling Bunker he was off by $150 million and actually owed about $350 million.
Most of the revelations about the Hunts' dealings came out under persistent questioning by Sen. Donald Steward (D-Ala.) chairman of the Senate agriculture subcommittee before which the Hunts testified in the afternoon.
A House subcommittee chaired by Rep. Benjamin Rosenthal (D-N.Y.) heard the Hunts first. After the Hunts testified, the committee agreed to drop a contempt of Congress citation initiated after they failed to appear on Tuesday.
Stewart laboriously pursued the brothers and their five lawyers through an international financial thicket, getting them to reveal the size of their debts and their major creditors.
Bunker and Herbert told Stewart each of them owes about $100 million to the Swiss Bank Corp. They said they also have major obligations to Merrill Lynch, Pierce, Fenner and Smith, the nation's biggest stock and commodity broker, and to ACLI International, a commodity firm controlled by Adrian C. Israel, chairman of People's Drug Stores of Washington.
Both brothers testified they have sold virtually all of the silver futures contracts they acquired on United States commodity exchanges, but still hold futures positions in London.
The brothers also said they still hold "forward contracts" to buy silver here and abroad.
Under terms of their new partnership, Bunker and Herbert said they have agreed not to buy any more futures contracts in silver or any other commodity, so long as the partnership is in effect.
The ban on further silver speculation is also part of the loan agreement worked out -- with Volcker's okay -- between Placid Oil and the banks that are lending them money, lawyers for the Hunts said.
Herbert Hunt, who did most of the talking during the day of testimony, insisted repeatedly the brothers were not speculating in silver, but were investing in the metal because they believed it would become more valuable.
Herbert said he and his brother -- acting independently, but agreeing in principle -- began buying silver in 1973 and 1974 when the price was less than $3 an ounce. They kept buying and made most of their purchases by last summer, at prices of less than $8.50 an ounce.
The Hunts insisted it was not their purchases, but those of others who decided to get on the silver bandwagon, that caused prices to take off last fall and soar to $50 in January.
The boom and bust of silver prices was the result of "manipulative actions" by directors of the New York Commodity Exchange, known as Comex, Herbert Hunt charged.
Urging the congressional committees to investigate possible conflicts of interest by Comex board members, he said exchange officials "had a vested interest in seeing that the price of silver went down."