The Asian Crisis

They say a problem is an opportunity in disguise. However, for us the Asian crisis was merely two problems in the same overcoat. Much of the money used to fund what, a few years earlier, were referred to as ‘Tiger Economies’ came from financial institutions in Europe and the US. When, like MTI’s stake in our competitor in Singapore, these investments went sour, UK banks were among the investors left trying to bounce dead cats. In a desperate bid to reduce their exposure, banks stopped advancing new loans and called in as many of the existing ones as legally possible. Hit hard was the commercial property market; the City of London first, then a wave of distressed properties rippling out into the provinces.

Until Simon Baker visited our office, I never realised we were a property company. In retrospect, all the signs were there. I designed and built our offices and so, perhaps, we could be regarded as developers. However, there were no plans to sell our office. It was Lloyds Bank’s affiliated estate agent, Januarys, who originally decided our premises were worth over £100,000 more than they cost to build. It was the same company that had now discovered, due to the property market crash, the building was worth less than the mortgage we used to finance its construction. By choice, we would have steered clear of using Januarys. Prior to our second move to new premises, we planned to build an office close to where we were based in Orwell. We asked Desmond Hirsch in Januarys’ Royston office to estimate the value of the land. By the time we raised the finance and put in an offer, the estate agent had ‘found’ the property for one of its clients. So obviously, given Januarys’ close association with Lloyds, I regarded the valuation of our office as suspect. Ultimately, what the bank said the building was worth was irrelevant as it wasn’t possible to call in the mortgage. However, the next time the interest rate was reviewed, it rose radically even though the base rate had fallen.

It is possible to retain a grudging admiration for an adversary – not Simon, however. He seemed a weak person who, with the power of the bank behind him, knew he could play with all the cards face upwards. Later, it transpired one card was never laid on the table. His stated role was to act as a special advisor, helping us through ‘this crisis’. The same crisis that began when the bank told us, as the market value of our office had fallen below the residual value of the mortgage, our overdraft facility would be withdrawn ...


... (An extract from The Ghost in the Labyrinth by Peter Kruger)


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