Nomura appointed to oversee sale of Tokyo Star Bank
Lone Star Funds and its fellow creditors have hired Nomura to sell off Tokyo Star Bank, The Wall Street Journal reported, citing people familiar with the matter. Lone Star sold the asset to Advantage Partners (AP) less than four years ago but resumed control in May after the debts tied to the acquisition were not repaid. Other creditors include Shinsei Bank, Crédit Agricole and Aozora Bank.
It was reported yesterday that Australia and New Zealand Banking Group (ANZ) was considering a move for Tokyo Star. However, the sale process is believed to be at a very early stage with documentation yet to be sent out to potential bidders.
Any transaction will come under close scrutiny from Japan's Financial Services Agency, which is keen to see mid-size banks steer clear of the risky lending policies that endangered them during the global financial crisis.
Lone Star acquired Tokyo Sowa Bank from the Japanese government in 2001 and restructured the lender, renaming it Tokyo Star. It took the bank public in 2005 and agreed to sell a majority stake to AP in 2007. AP took full ownership a year later. To complete the acquisition it borrowed JPY170 billion ($2.04 billion) from more than 20 lenders as a combination of senior and mezzanine debt on the understanding that it would use future dividends to repay the group. The final repayment deadline was slated for 2013.
A combination of deflation, a crowded market and citizens' inability to repay their own loans during the global financial crisis saw Tokyo Star rack up significant losses. AP looked at potential exit options - apparently hiring Nomura to assess the prospects for a relisting or a trade sale - but by October 2010 had yet to find a secondary investor to help cover its loans.
Lone Star once again became Tokyo Star's largest shareholder, with a 33% stake, and the remainder was divided up amongst the other creditors. As part of the agreement, Lone Star was exonerated of all payment responsibilities.
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