Thursday, January 31, 2013

FSTB - Peregrine

Peregrine Fixed Income Limited (in liquidation)
Peregrine Investments Holdings Limited (in liquidation)
Pursuant to the appointment by the Financial Secretary of Richard Farrant as
Inspector under section 143(1)(a) of the Companies Ordinance (Chapter 32).
12th February 2000


"...Peregrine Investment holdings: the Chinese characteristic s of a Hong Kong
investment bank

The practices of the Hong Kong investment group Peregrine, headed by British expatriate Philip Tose and Hong Kong Ž nancier Francis Leung, also reveal the degree to which Hong Kong’s Ž nancial environment constitutes an intermeshing of global mechanisms and ethnic Chinese business norms. Peregrine was founded in 1988. By the mid 1990s, the group had emerged as the largest homegrown Southeast Asian investment bank and had risen to a position of prominence in Hong Kong’s Ž nancial scene. Through a series of corporatemanoeuvres and acquisitions, Peregrine transformed a capital base of US$38 million in late 1988 into US$5 billion in assets and ofŽ ces in 16 countries at its peak.45 Between 1991 and 1995 the Ž rm produced 160 per cent annual compound growth in turnover.46 This ascent was intimately connected to Peregrine’s Chinese Ž nancial management style—its high risk deals, centralised decisionmaking structure and reliance upon personal, in some instances political, connections were all reminiscent of traditional ethnic Chinese business strategies. Yet, in the realm of Ž nance, connections and quick decisions are of heightened importance, given the speed needed to capitalise on information. Peregrine certainly made the most of its network opportunitie s in the early to mid 1990s.
Among Hong Kong’s major investment institutions , Peregrine was the Ž rst to recognise the subtle shift of power in Hong Kong from the old British hongs to the emerging Chinese. Key relationships fostered in these early stages with major ethnic Chinese Ž nancial power brokers—Li Ka-shing, Larry Yung of CITIC PaciŽ c, Malaysian tycoon Robert Kwok—ensured that Hong Kong’s most important corporate-Ž nance deals would pass through Peregrine’s hands. Indeed, Li, CITIC and Kwok all held shares in Peregrine in the early stages. A unique trust between co-founder Philip Tose and Li—Hong Kong’s most powerful tycoon—was crucial, allowing Peregrine to access Li’s extensive network of friends and prote´ge´s. As a result of this expanding web of commercial contacts, Peregrine was consistently at the centre of major equity placements and underwriting for overseas Chinese corporations, as well as constituting a key player in Red Chip deals. For instance, when CITIC decided to buy a stake in Hongkong Telecom in 1993, it called Morgan Stanley for consultation. When the chairman of Morgan Stanley Asia, Jack Wadsworth, met with Larry Yung at CITIC, Philip Tose was already present: ‘I asked Yung what Tose was doing there’, recalls Wadsworth. He simply said, ‘I have a stake in Peregrine’. Thus ended Morgan Stanley’s hopes for an exclusive role in the deal.47 Such powerful connections ensured Peregrine’s supremacy with respect to market knowledge in Hong Kong. A 1996 share placement deal with Cheung Kong—the holding company of Li Ka-shing’s empire—is indicative of Peregrine’s Chinese style and its af uent position in Hong Kong’s Ž nancial community. Initially, Cheng Kong offered Morgan Stanley the placement, but gave the American Ž rm only 20 minutes to evaluate the plan. It declined. Yet, without hesitation, Peregrine stepped in to assume the risk and lead-manage the $US679 million deal. Within two weeks of this placement, Peregrine made a $US419 million issue for CITIC PaciŽ c and US$466 million issue for Hongkong Telecom. Connections, very quick responses via a centralised decision-making structure and a stomach for risk allowed the investment bank to broker these deals.48 Peregrine’s second co-founder, Francis Leung, was also an innovator and leading player in the Red Chip market. Of approximately US$8.2 billion raised between 1994 and 1997 through Red Chip listings, Peregrine was lead-manager— either on a sole or joint basis—of an estimated 35 per cent of the issues.49 Much of this was attributable to Leung’s network of relationships on the mainland, which actually grew with each new listing. After successfully listing and raising capital for various Chinese companies, Leung was made non-executive director at Beijing Enterprises, Shanghai Industrial, Shum Yip and other prominent Red Chips..."


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