Profile: Philip Tose: Hong Kong banker who fell prey to his own ambition
Peregrine's chief is a ruthless operator. But this time Philip Tose may have taken a risk too far, write David Gillen and Alec McCabe
Sunday 18 January 1998
He hasn't lost his appetite for risk. Last week, Tose was forced to lock the doors of his Hong Kong investment bank, Peregrine Investment Holdings, after its bets on Asian currencies went wrong.
The shutdown ends Peregrine's stunning rise in less than a decade from a small niche player to Asia's number one underwriter of stocks. Tose cultivated the firm's reputation for ruthlessness, and in November called Peregrine "a company people love to hate". When news of the likely liquidation broke on Monday, it triggered a near 9 per cent decline in the Hang Seng Index.
Peregrine fell victim to a plunge in the Indonesian rupiah after it lent about $400m (pounds 245m) to companies in that country. Those loans are now unlikely to be repaid. The company was all but shuttered by Hong Kong regulators 10 days ago, after a plan to sell part of the firm collapsed. Price Waterhouse was appointed as liquidator on Tuesday.
"Peregrine wanted to be the Morgan Stanley of Asia," said Tim Tuttle, manager of the $1bn Colonial Newport Tiger Fund. "But they got caught extending themselves too far and outrunning their credit lines."
Hong Kong rivals also point out that Peregrine, initially admired as a boutique broking business, over-reached itself in building up a huge bond business that finally proved its undoing.
Peregrine was rumoured to be in trouble months ago when the firm sold assets to cut its balance sheet. Tose responded in October, saying his firm was "a much more stable business than people give us credit for". Peregrine shares were trading at nearly HK $19 valuing the business at well over pounds 900m.
At the time Tose accurately forecast that Asian companies faced a credit squeeze. He did not forecast that Peregrine would be one of the highest profile victims.
To some rivals, Peregrine's troubles may seem like just deserts. Tose, who named his firm after the swiftest and deadliest bird in the falcon family, relished his firm's reputation for ruthlessness.
He is no stranger to controversy. Bankrolled by Li Ka-shing, Gordon Wu and other Hong Kong tycoons, Tose and Peregrine muscled their way into a Hong Kong market dominated by Wall Street firms.
Long before the former British colony returned to Chinese sovereignty last July, Tose and his partner, Francis Leung, cultivated ties with Peking to become a top investment bank, helping a string of Chinese-owned companies sell shares in the Hong Kong market. At that time, China was almost untouchable for global investment banks such as Goldman Sachs or Merrill Lynch as memories of the bloody crackdown in Peking in 1989 were too fresh.
Tose's politics made some people bristle. Peregrine opened offices in North Korea and Burma at a time when other banks held off because of those countries' spotty human rights records. In 1992, he criticised Chris Patten, Hong Kong's last British Governor, for trying to push for more democracy in the territory. What Asia needed, Tose said, was "economic democracy," not lectures from "do-gooders".
Peregrine itself had run into trouble before. In 1993, a year in which Tose and Leung each earned more than pounds 3m, Hong Kong regulators censured the firm for trading irregularities. Just before the doors closed last week Tose said he approached the Hong Kong government for help. It turned him down.
Tose began his career in broking at the British firm Vickers da Costa, where his father was a managing partner. In 1972, he left the City of London for Hong Kong. Here, as a young stockbroker, he caught the eye of Li Ka-shing, the chairman of Cheung Kong (Holdings), with a research report about Li and his company. Li, dubbed "Superman" by the Hong Kong press because of his supposed investment prowess, started trading stocks through Vickers.
It was also at Vickers that Tose met Leung with whom he founded Peregrine in 1988. Until last week Leung headed the equity and corporate finance department, which remained one of the most profitable parts of the group.
Today, Tose has many of the same trappings of success as Li Ka-shing and Hong Kong's other "taipans", or big bosses. Among these are two Bentleys, hunting holidays in Scotland and a regular spot in Hong Kong's society pages with his wife, Jennifer. Last year, Peregrine agreed to sponsor Hong Kong's most famous sporting event, the Hong Kong Sevens rugby tournament, until the year 2000.
Tose's troubles took a turn for the worse two weeks ago when would-be rescuer Zurich Group abandoned a plan to pay $200m for more than 20 per cent of Peregrine, money the firm needs because the value of its stock and bond holdings tumbled during Asia's financial meltdown.
Peregrine's shares fell 20 percent in the final week of trading as word spread that the company was owed about $265m by the inaptly named Steady Safe, a taxi company in Indonesia, where a plunge in the rupiah is making it tough for many firms to repay their foreign debt.
"It was an unfortunate transaction," said Tose blaming the problem on Steady Safe's inability to refinance what was supposed to be a short- term loan from Peregrine.
"Clearly Indonesia did disappoint everyone," said Tose pointing to the astonishing 50 per cent fall in the rupiah in the first week of January.
Yet rivals point out that Peregrine had lent almost a quarter of its entire capital to Steady Safe, a risky bet however short the intended loan period.
Peregrine, whose shares are currently suspended at HK$4.20, may still succeed in finding an investor or a buyer for all or part of its business. The firm's money management arm, Peregrine Asset Management, has already attracted interest from possible suitors, said Gary Greenberg, deputy managing director at the $450m asset manager.
"If it wasn't so much money, I'm sure a few people around town would have come together and bailed them out," said Peter Everington, the chairman of Hong Kong's Regent Fund Management. "But I very quickly concluded this is probably beyond my capacity."
Tose himself said he and Leung were working hard to find buyers for Peregrine's equities division, talking with potential investors in Europe and Hong Kong.
"We've been approached by a number of firms that are interested," said Tose.
There was also talk that Leung and his team might strike out on their own.
Copyright: IOS & Bloomberg
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