William Du specializes in securities investment, and Liang Zhongtao specializes in corporate financial management and project financing. With their reputation in the Hong Kong investment community and their good relationships with Chinese-funded consortiums and domestic institutions, Peregrine Investment Group has developed rapidly in the past 10 years. With total assets of HK$24.2 billion, it has become the largest investment banking group in Hong Kong.
Peregrine Investment Group has 35 branches in Southeast Asia, Europe and the United States. It is mainly engaged in five major businesses: stock products, fixed-rate bond products, direct investment, fund management, and property investment and development. In addition to general stock and securities trading business and investment banking business, Losing ambition has developed into a company that provides comprehensive financial services. Its profits in 1996 and the first half of 1997 were HK$850 million and HK$635 million respectively.
In 1996, Peregrine's assets increased significantly by HK$9,588 million, of which HK$2,077 million was borrowed, HK$3,027 million was obtained from the issuance of short-term and medium-term promissory notes and commercial promissory notes, and the credit line increased by HK$1,526 million.
Peregrine accelerated its expansion through borrowing, and its debt-to-asset ratio rose sharply from 77% in 1993 to 262% in 1996. Today, it mainly raises funds through bank loans and other loan instruments. Most of the bank and other debts are denominated in Peregrine. The shares owned serve as collateral.
Peregrine's annual interest expense increased from HK$39 million in 1992 to HK$584 million in 1996.
As the president of the group, Liang Zhongtao knows that in the past few months, the Hang Seng Index has plummeted, and the group’s stocks have suffered losses estimated at nearly HK$1 billion. In addition, the US$260 million loan owed to the company by the Indonesian Rubber Company may be bad debts. As a listed company, investors have the right to I know, but once it is announced, Peregrine's share price will plummet and the company's collateral will shrink significantly.
On November 16, after the Swiss Zurich Group announced that it would invest US$200 million in Peregrine, on the 17th, Peregrine’s share price rose from HK$6.8 to HK$7.65, a surge of 7.07%.
Peregrine’s share price is now HK$8.15, with a total market value of HK$3,078.62 million, but 21% of the company’s shares are pledged to lending banks and other financial institutions as collateral.
Peregrine's share price reached HK$13.25 in August this year, with its total market value reaching more than HK$5 billion. After the Hong Kong stock market plummeted, the share price shrank by nearly 40%.
Liang Zhongtao is the founder of Peregrine. William Du has made outstanding contributions in the development and growth of Peregrine. He is now the central figure of Peregrine Investment Group and enjoys a high reputation among the group management and ordinary employees. His prestige is among Above Liang Zhongtao.
Although Liang Zhongtao disapproves of the company's large investment in fixed-rate debt products in Indonesia, he still has trouble saying so.
Although the company's financial management team is controlled by the board of directors and the administrative committee is responsible for policy decisions, among the 22 team members, 10 were hired by William Du and only 5 were hired by Liang Zhongtao.
William Du targeted Merrill Lynch and Goldman Sachs, and lost his ambition to build Peregrine into a world-class investment bank. In order to achieve rapid development of the company, he established a fixed-rate bond and fund management department, which he was directly responsible for, and appointed Li Shizhen as the head of the company. Director of the Fixed-rate Bond Department. The business of fixed-rate bonds and bills has developed at an alarming rate. From 1995 to 1997, the revenue from fixed-rate bond products doubled continuously, accounting for about 80% of the group’s total operating income. Fixed-rate bond products have become Peregrine’s One of the main sources of business and profit.
The Fixed Income Bond Department was renamed Fixed Income Bond Co., Ltd., and Li Shizhen became the general manager and group director.
Li Shizhen can skip the group management and report directly to Du William, and Peregrine Fixed Income Bond Co., Ltd. can decide on any fixed-rate bond product transactions with the support of Du William.
Du William and Li Shizhen like to do large transactions that are much larger than their own scale, and leave the unsold portion of the newly issued bonds, accumulating less to make more, and the bond inventory and derivatives open positions in their hands. The number of contracts gradually increased. By the end of October, Peregrine's inventory bonds had reached US$1.15 billion, of which US$280 million were US$280 million of low-liquidity inventory bonds that had been stagnant for more than three months, accounting for 25% of the total inventory!
As the currencies of Southeast Asian countries continue to depreciate sharply, the solvency of companies that issue fixed-rate bonds has declined and liquidity has been low.
The proportion of sexual inventory bonds is getting higher and higher, and Peregrine is unable to repurchase such bonds in U.S. dollars, making cash flow difficult.
Liang Zhongtao knew very little about the operating model of Fixed Interest Bond Co., Ltd. It was not until the end of October that he learned that the US$260 million loan owed to the company by Indonesian Rubber Company had become a bad debt, and he discovered that the group's loss problem was more serious than imagined.
[In view of the general environment,
Most of Peregrine's business is concentrated in Asia, with 38% in Indonesia, 20% in Thailand, 15% in China/Hong Kong, 5% in South Korea, 4% in Malaysia, 4% in Singapore, 4% in the United States, 3% in India, and 3% in Taiwan. %, and 4% in other regions.
As the largest underwriter in the Indonesian debt market, Peregrine holds US$400 million to US$500 million in Indonesian bonds. The Indonesian rupiah continues to depreciate, and the solvency of Indonesian companies continues to decrease. These Indonesian bonds will continue to fall in price, and redemption will become a big problem. .
The board of directors decided to take a series of rescue measures. The transfer of 24.1% preferred shares of the Swiss Zurich Group for US$200 million in cash is one of the "rescue plans."
On November 20, the Korean won and the Indonesian rupiah depreciated sharply again. For Peregrine, it was even worse. The continued deterioration of the company's finances will make Peregrine's rescue more difficult.
Once it is not handled in time, the lending bank will stop lending, capital turnover will be insufficient, a credit crisis will occur, and Peregrine may go bankrupt and liquidated.
"Mr. Liang, we did not expect that the Indonesian rupiah would continue to depreciate sharply. The top priority is to sell the bonds, stocks, properties and other assets held by the company, cash out more than 2 billion US dollars, and repay the bank's loans that are about to expire and the bank's upcoming loans. Pay the bills and look for capital injection to avoid the company's credit crisis."
As a member of the group's board of directors, Huang Yongcan knew that Liang Zhongtao and Du William had serious differences in the group's investment and management. The conflict was about to break out. He was caught in the middle and found it difficult to behave. When he saw the key to solving the crisis, he looked for partners and injected funds!
"I agree with Mr. Huang's suggestion. I will be responsible for selling the company's bonds, stocks, properties and other assets. Please ask Mr. Liang to find a partner. The sooner the better."
Indecisiveness leads to disaster!
William Du, who has experienced stock market crashes and financial crises many times, also realizes that the serious crises encountered by the company are inseparable from him. His most important fixed-rate bond product, which is also the company's most profitable, has become the company's biggest landmine.
"I agree with Chairman Du's suggestion!"
Liang Zhongtao also understands that now is not the time to hold those responsible accountable. We need to unite and tide over the difficulties together. Otherwise, no one will benefit from the bankruptcy of Peregrine.
