Asian Crisis Forces Peregrine to Shut Down
Peregrine Investments Holdings Ltd., one of Asia’s largest investment banks, locked its doors Monday, the biggest casualty yet of the financial crisis sweeping the region.
Most of Peregrine’s staff in Hong Kong cleared their desks late Sunday, and a spokesman said the firm took steps late Monday to file for liquidation.
The troubles at Peregrine, which has about 1,700 employees worldwide, shook Hong Kong financial markets and helped trigger an 8.7% decline in the benchmark Hang Seng index.
Peregrine fell victim to a plunge in the Indonesian rupiah after it lent about $400 million to Indonesian companies. These loans are unlikely to be repaid.
The shutdown caps the stunning rise of Peregrine from a small niche company to one of Asia’s top underwriters of stock within a decade. The firm posted pretax profit of $97 million in the 10 months ended October.
Its founder, Philip Tose, cultivated the firm’s reputation for ruthlessness and--he said in October--made Peregrine “a company people love to hate.” Tose failed to find investors over the weekend after a plan to sell a third of the firm fell through on Friday.
That means opportunity for U.S. investment banks and other financial companies looking to expand their business in Asia.
Peregrine “was an institution that based its entire fortune on Asia,” said David Roche, the president of Independent Strategy Ltd., a research firm in London.
“The global investment banks--the Goldman Sachses and the Merrill Lynches--will have their business reinforced,” said Roche, referring to U.S.-based Goldman Sachs Group and Merrill Lynch & Co.
Indeed, shares of Merrill Lynch rose $1.13 to close at $64.50 on the New York Stock Exchange on Monday.
Peregrine isn’t the only securities firm in Asia whose difficulties are creating opportunities for global investment banks. Other investment banks such as Hong Kong-based Jardine Fleming Securities Ltd. are paring staff and cutting salaries as the slide in Asian stocks and currencies since June threatens to push Thailand, South Korea, Indonesia and the Philippines into recession. Many companies said their plans to raise money in the markets have been derailed.
Tose, a former British Formula 3 race-car driver, founded Peregrine with the backing of billionaire property developer Li Ka-shing. Peregrine’s list of shareholders reads like a Who’s Who of Hong Kong’s rich and powerful, and includes Li’s Cheung Kong (Holdings) Ltd., the Beijing-backed Citic Pacific Ltd. and units of U.S.-based fund manager Franklin Resources.
The Hong Kong investment bank virtually was shut down by regulators Friday after Zurich Group abandoned plans to buy a $200-million stake in the firm.
By late Monday, a rescue looked increasing unlikely as Peregrine units across Asia suspended operations.