Peregrine creditors tied to Indonesia

Peregrine creditors tied to Indonesia

HONG KONG (Reuters): Creditors of Peregrine Fixed Income --
the unit which took center stage in the fall of the Peregrine
group -- are soon to learn how difficult it will be to retrieve
sums due, with their fates largely tied to Indonesia.

The provisional liquidators of Peregrine Fixed Income Ltd and
Peregrine Derivatives Ltd are due to hold creditors meetings on
June 11 and 12. A large part of the money they hope to raise and
return to creditors has been swallowed in Indonesia.

"That is where we are going to have problems collecting the
money," Price Waterhouse partner Simon Copley said.

"Some of the corporates that owe us money from around the
region, particularly Indonesia, really don't want to talk to us
at all," Copley, who is on the provisional liquidation team, told
Reuters in an interview yesterday.

It will be a number of months before liquidators pay an
interim distribution to creditors. The recuperation process could
take years and so far provisional liquidators have collected
about US$260 million owed to Peregrine Fixed Income and about
HK$350 million owed on the derivatives side.

"It is a good portion of the total outstanding," said Stephen
Caswell, also a Price Waterhouse partner, adding however that the
large transactions were the most problematic.

"There are very substantial assets still to be collected and
problematic assets," said Caswell. "Obviously hand in hand with
that goes that there are very substantial creditors as well."

Peregrine Investments Holdings Ltd was one of Asia's largest
independent investment banks before the regional financial crisis
led to its collapse in January, bringing down the Peregrine Fixed
Income and Peregrine Derivatives units too.

Boxes of paperwork, piled high to the ceiling, are stacked
against the walls of the once busy dealing room -- now the hushed
working place of several lawyers and accountants who sift quietly
through Peregrine's transactions.

"It has got to be the most complex liquidation there has ever
been in Hong Kong," said Caswell. "This is the first big
derivatives house which has gone into liquidation."

Provisional liquidators said the exposure on the derivatives
side was greater than Peregrine's bond portfolio exposure.

Peregrine was the leading player in Asian bonds with a 200-
strong team in fixed income at its peak. Its bond portfolio was
valued at about US$2-3 billion in mid-1997.

"It is much reduced from that," said Caswell. "The objective
is to get the best value out of that bond program."

Some creditors have asked the provisional liquidators not to
sell the portfolio while the market is at low levels.

"They don't want a fire sale," said Caswell. "You might get
better value for them holding them longer term."

One suggestion has been to put the bonds into a special
purpose company and give shares of that company to creditors.
"There are all sorts of ways of doing this," said Copley.

"But before that, you have got to get your hands on the
things. The custodians in some cases have still got those bonds
and are not too keen on giving them back until they are satisfied
that their debts have been settled."

Peregrine's liquidation is bound to meet litigation along the
way. A first writ was filed last week by Commerzbank AG which
said Peregrine failed to remit US$40.12 million to the bank at
the conclusion of a foreign exchange swap on Jan. 9.

It is claiming 73.23 million German marks and interest.

"We think that is settlement risk and therefore they should be
an unsecured creditor," said Caswell. "It would be unusual in a
case of this complexity if there wasn't a lot of litigation."

Hong Kong's Securities and Futures Commission has launched an
investigation into the Peregrine case and provisional liquidators
said they would be interested if the investigation brought up any
evidence suggesting culpability. "Our sole focus would be if
there is an avenue where by conducting a piece of litigation we
could get more value to creditors," said Caswell.

"There are no plans in hand at the moment."