Watchmaker Peace Mark Gets Liquidator

HONG KONG – Provisional liquidators have been appointed for Hong Kong-based watch retailer Peace Mark (0304.HK), nearly a month after the firm suspended its shares and sought a “white knight” suitor to shore up its balance sheet.

Peace Mark, which sells watches for brands including Rolex, Omega, Rado and Tissot, said on Sept. 3 it could not meet the demands of banks to repay HK$1.22 billion ($156.4 million) in debt, capping months of speculation that it was struggling financially.

The embattled firm was seeking deals with private equity firms CVC Capital and Carlyle Group [CYL.UL].

“We were appointed liquidators yesterday,” Ferrier Hodgson Executive Director Rod Sutton told Reuters on Thursday. He has been appointed liquidator along with his colleague Vincent Fok.

“The application was made by a number of banks following a lack of confidence in the ability to undertake a restructuring,” Sutton said in a phone interview.

Lenders were told at a meeting on Wednesday that ABN AMRO, which holds roughly a third of the company’s debt, had sued for Peace Mark’s liquidation this week, sources who represented creditor banks told Reuters Basis Point. An ABN AMRO spokeswoman could not immediately be reached for comment.

Sutton said the application was made to a Hong Kong court. He added that the process would take a couple of weeks, and that there was “absolutely” a chance of rescuing the company.

A Ferrier Hodgson news release said it was “undertaking an urgent assessment of the financial position and operations of Peace Mark in consultation with local management, creditors and other stakeholders in order to determine the optimal strategy for the business”.

Peace Mark spokeswoman Cherry Lai referred calls to a representative from Ferrier Hodgson.

Earlier this year, Peace Mark paid $368 million to buy Singapore-based luxury watch retailer Sincere Watch.

In a statement, Ferrier Hodgson said Sincere Watch was not affected by the appointment of the provisional liquidators and would continue normal operations. It said Sincere Watch was not exposed to Peace Mark’s financial obligations.

“Sincere is ‘ring-fenced’ from Peace Mark and employees, suppliers and customers should be assured that it is business as usual with no changes in the way that Sincere operates,” Sutton said in a statement.

Sincere Watch’s shares are pledged to ABN, BNP Paribas and ING Bank, which provided a roughly $201 million bridging loan in February for Peace Mark’s acquisition of Sincere, said a source at one of the three lead banks, Reuters Basis Point reported.

WHITE KNIGHTS?

Shares in Peace Mark have been suspended since Aug. 18, last trading at HK$1.50 a share, when it was announced that CVC Asia Pacific, the Asian unit of London private equity firm CVC Capital, made an indicative offer for shares in the company.

CVC, which was seeking a roughly 30 percent stake in the firm, withdrew its offer on Aug. 29.

This week, media reports said U.S. private equity giant Carlyle Group was in talks with the watch maker and retailer.

Peacemark shares rose steadily last year, hitting HK$14 in late July 2007 and holding within a dollar of that mark for the remainder of the year. But its stock has been in free-fall most of this year, including a 42 percent drop on Aug. 11 — a day when its shares were down as much as 73 percent.

Analysts have blamed the steep decline in the company’s share price on concerns about its debt load and a lack of clarity in its annual report, released at the end of July.

Peace Mark operates more than 100 luxury retail stores, mostly in mainland China and more than 1,000 points of sale as well as manufacturing operations, the statement said.

By Michael Flaherty and Joseph Chaney

(Editing by Kim Coghill)