Grace's Guide

British Industrial History

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Polly Peck

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Polly Peck International (PPI) was a textile company.

Founded in 1940 by Raymond Zelker and issued shares in the 1970s. The company was barely profitable.

It began a dramatic revival in 1980s when Asil Nadir, a Turkish Cypriot, (the Sultan of Berkeley Square, as he was known), obtained a controlling stake in the company. Nadir bought the shares in Polly Peck at 9p per share owning 58%. He intended to use PollyPeck, then having a market capitalisation of just under £300,000, as a stock market vehicle to expand his personal wealth.

On 7 July 1980, he was appointed as chief executive. He turned PPI into a conglomerate by building upon the company’s basic operations and expanding.

In less than ten years PPI’s market capitalization, from a growth by acquisition strategy, went from only £300,000 to £1.7 billion at its peak. It became a holding company for a world wide group, of over 200 direct and indirect subsidiary companies.

Then the Serious Fraud Office (SFO) raided South Audley Management, the company that controlled the Nadir family interests.

Trading in the company’s shares was suspended on September 20, 1990. PPI’s problems became apparent by the structure of the group’s debts. The company had over £100 million in short-term revolving lines of credit. Even more debt consisted of long term loans for which Nadir had offered Polly Peck’s shares as collateral. As the stock market declined, the value of these shares fell to less than one-fourth of the related outstanding debt. Polly Peck shares opened at 245 pence on September 20, 1990 but within minutes the issue dropped more than 25 pence or ten percent. By 11.00am the share price dropped to 180 pence and by 2.20pm , when the shares were suspended they had dropped to 108 pence. Moody’s credit rating downgraded PPI’s short-term and medium-term debt from Ba1 and Ba3 to Ba3 and B2.

With pre-tax profits of £161.4 million, net assets of £845 million and 17,227 employees, the Polly Peck group was one of Britain's top one hundred quoted companies. In Cyprus, he was the largest employer after the State in the Turkish occupied area of Cyprus, with 7,500 people dependent on his businesses.

When placed into administration Polly Peck was found to have an almost complete lack of internal controls at its London office, allowing Nadir to transfer huge sums from the company's London bank accounts without question.

Ultimately the company collapsed, and charges were brought against Asil Nadir for 18 charges of false accounting and the theft of $48 million which he denied.

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