"Caspian has never been in better shape to take advantage of market conditions in the whole of its history." So said Caspian Securities' founder, Christopher Heath, speaking to Euromoney in March of this year. Four months on and Caspian, the investment bank dedicated solely to emerging markets, is no more.
His interview with Euromoney (headline: Bolstered against the Asian storm?)was abruptly followed by his stepping down as chief executive of the firm - although there is no suggestion that the two were connected - with Anthony Walton taking the reins in what must be one of the shortest appointments of the veteran banker's career. At the time senior sources denied that Heath's departure from the chief executive's role was in any way related to market volatility.
Since announcing the decision to sell or close its businesses, Caspian's senior management has pulled down the PR shutters. A short press statement from Walton says only that the bank remains strongly capitalized and the board has agreed that the best use of that capital is repatriation to shareholders. The 40 partners in Caspian all own equity in the bank.
Perhaps the most telling sentence of the press statement is the observation that "Caspian was built for market conditions that do not prevail today". Given that emerging markets are the most volatile of the lot, the idea of a start-up operation, focused solely on emerging-market investment banking, and lacking the support of a large parent, would appear to have been flawed from the start.
"The reality is that niche operations are always predicated on bull markets," observes one emerging-markets specialist. "The inherent weakness is that when the rules of engagement change and markets become volatile it is very hard for niche players to maintain credibility, and people get nervous about counterparty risk." Caspian succeeded in raising an extra $80 million of capital through a rights issue in December of last year which took its capital base to $240 million. But the bank had never been profitable as a whole, and Heath's expectation that it would be in profit by the end of this financial year appeared optimistic in the extreme.
Things were reported as being "pretty quiet" in Caspian's London office, apart from the inevitable calls from headhunters. Insiders say that the press announcement of the bank's closure appeared in advance of any internal communication. "It's not uncharacteristic of the way that the management has operated in the past," says one Caspian banker. Uncertainty remains over which of the businesses will be sold, although the feeling is that the bank will sell whatever it can. Caspian insiders rate the Latin American business as one of the most attractive, followed by India and Turkey. "London," adds one lugubrious banker, "is not so attractive." Heath meantime has reappeared as a partner of fund-of-funds manager Optima. James Rutter