Peregrine Presentation Final

8/2/2019 Peregrine Presentation Final

1/15

PEREGRI

NE

Team:

Isakova Nataliya

Sagaidak MaximSokolova Tatiana

Shtrahov Arseniy


2/15

Structure

Introduction (problem, brief history)

Company Structure

Peregrine in 1997 Asian Financial Crisis

Factors behind Peregrine's downfall

How they could avoid it Conclusions


3/15

Peregrine

The largest investment bank in Asia outside of Japan

The highest profile corporate failure in the AsianFinancial Crisis

Was founded in 1988 by Frances Leung and PhilipTose

Great reputation in the beginning of 90s (the fatherof red chips)

Expanding into other markets in form of joint

ventures One of the top 5 players in Asian Market: Goldman

Sachs, ABN AMRO, China International Capital Corp.,Morgan Stanley DW, Peregrine


4/15

PFIL Peregrine Fixed IncomeLimited

Conditions:

Fast economic growth of Asian economies

Threat of competitors entering this market

PFIL:

Started in April 1994

Planned to enter the bond market of Asia

Specialized in origination , distribution and trading of fixed-income securities

for Asian issues in local currencies and US dollars. (mainly Hong Kong,

Indonesia, Malaysia, Thailand).

Willingness to undertake large transactions in relation to Peregrines own size

Growth of inventory of debt holdings and derivatives

PFILs performance exceeded expectations. It soon accounted for a

predominant part of the Groups turnover, and led to even more dramatic

growth

Expansion

strategy


5/15

Companys structure

12%

85%

0%0% 0% 3%

6 month ended 30 june 1997

15%

83%

0%

0%0% 2%

1996

15%

80%

0%0% 0%

5%

1995equity products

fixed-income products

direct investments

asset management

property investment anddevelopment

invesment trading

17%

80%

0%0% 0%

3%

10 month ended 31 october1997


6/15

Peregrine before crisis

Asias most dynamic investment house (1700 staff, 33 offices, 15 countries)

Reputation of aggressive and fast growing firm

27132

2586

31731

1906

28571

68

Revenues Net income

Revenues & NI, 1996

Morgan stanley Merrill Lynch Peregrine

302287 298057

3101

Morgan stanley Merrill Lynch Peregrine

Total assets, 1996

Total assets


7/15

0.00

20,000,000.00

40,000,000.00

60,000,000.00

80,000,000.00

100,000,000.00

120,000,000.00

140,000,000.00

160,000,000.00

180,000,000.00

200,000,000.00

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

HK$,

thousands

Year

Peregrine's turnover

0.00

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

1988 1990 1992 1994 1996 1998

HK$,

thousands

Year

Profit before taxation

Peregrines dinamics


8/15

Asian financial crisis

Started in mid-May 1997

Indonesia, South Korea and Thailand

were the countries most affected bythe crisis

Indonesian Rupiah to USD


9/15

Effect of financial crisis onPeregrine

38%

20%

15%

27%

Turnover (%)

Indonesia

Thailand

HongKong/MainlandChina

Others

No demand on most of

Peregrines debt paper portfolio

Share price fell by 60% (august

october 1997) - that reduced

Peregrines ability to fund itself

by stock lending


10/15

0.00

50,000,000.00

100,000,000.00

150,000,000.00

200,000,000.00

250,000,000.00


6 month ended 30 june1997

Turnover

0.00

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00


6 month ended 30 june 1997

Operating profit



11/15

0

10

20

30

40

50

60

70

7/20/1995 10/28/1995 2/5/1996 5/15/1996 8/23/1996 12/1/1996 3/11/1997 6/19/1997 9/27/1997 1/5/1998 4/15/1998

91-180 days % >180 % Total


% of bad debt of total assets


12/15

Steady safe deal 1997

Indonesian taxi-cab company

Income in Indonesian rupees

Short-term bridge financing provided in US$350 (one-third of Peregrines

capital)

Analysts say such confidence was misplaced. Any lender entrusting the

equivalent of one-third of its capital to any borrower, much less a little-

known company in a country notorious for corruption, shows poor financial

judgment

Events in Indonesia tumbled out of control, and its currency collapsed.

Steady Safe, with its earnings in rupiah, could no longer pay meet payments

on its dollar loans, particularly the huge loan from Peregrine. The taxi

company's stock sank to a sliver over one penny and, last week, it locked itsdoors


13/15

How Peregrine mighthave avoided thedebacle?

Question


14/15

Factors behind Peregrine'sdownfall

Culture of the company(arrogant, headlong rush todo deals). That arrogance ledthe company to lend toomuch money for questionable

projects and to exercise toolittle high-level supervisionover managers.

Risk management policy wasnever applied in PFIL.Internal audits of PHILs

business were never

completed .Low level ofcontrol form Peregrinesparent company.

Fixed income businessaccounted for 85% of alloperations, and its the mostrisky.

Providing credits in currencydifferent from companys

income currency. Steady Safedeal was complete mess.


15/15

Conclusions

Asian Financial Crisis shows the riskiness of

running business in emerging financial markets

Never provide credits in currency different from

companys income currency (because of default

risk)

Documents

Peregrine Presentation Final