Money Games

Chapter 2Project Safe

The weather in New York City was pleasant and mild in the fall. Dan Carroll, my partner at Newbridge Capital, and I walked out of the Stanhope Hotel at about 8 am as the early morning sun shone warmly on my face. Our car waited for us at the curb, and behind it, Fifth Avenue was jammed with the usual rush-hour traffic.

It was September 1998. Newbridge was raising its second fund, and we were in New York City to visit various potential investors.

Once in the car, I opened a folder of faxes I had received overnight from our office in Hong Kong. One of them was sent by our colleague Paul Chen. In it there were two brief descriptions (teasers, as they were called in investment banking) for the sale of two major South Korean commercial banks that had failed and been nationalized by the government. Chen explained that the government of South Korea had engaged Morgan Stanley, an investment bank, to be its financial advisor to conduct an auction to sell off control of both banks.

The Asian Financial Crisis had hit South Korea hard. By the end of 1997, the country had been on the verge of defaulting on its sovereign debt. Money was fleeing the country, and its foreign exchange reserves had plummeted to just $8.9 billion by December, barely enough to last a week or two at the rate of capital flight. The stock market had plunged by 49 percent, and Korea's currency, the won, had depreciated by 65.9 percent against the U.S. dollar. The country came so close to default ...