JC Flowers plans near-full exit from Japan's Shinsei Bank

JC Flowers and its associates – including CEO J. Christopher Flowers, who plans to step down from the bank’s board – will offer around 45.5 million shares at a price that has yet to be determined. Shinsei’s shares closed at JPY1,627 on August 8, the day of the announcement, but fell to JPY1,477 at the start of trading on August 9. The stock was trading around JPY1,456 at midday.

Several of JC Flowers’ funds have positions in Shinsei: the most significant is its Saturn IV vehicle, which has 32 million shares in the bank and will see its holding drop to 2.9 million shares after the sale, according to a filing. As a result the fund will go from the bank’s largest shareholder, with a 13.2% stake, to its eleventh-largest with 1.2%. The government-backed Deposit Insurance Corporation of Japan, which held a 10.4% stake as of March 2019, will become Shinsei’s largest shareholder.

JC Flowers and Ripplewood Holdings purchased Shinsei’s predecessor, the Long-Term Credit Bank of Japan, out of bankruptcy in 2000 for a total of $1.1 billion, making it the first Japanese lender to be owned by foreign investors. The investors renamed the bank to Shinsei, or New Life, streamlined operations, and improved the balance sheet with the help of the Japanese government.

In a 2004 IPO, JC Flowers and Ripplewood sold a one-third stake for $1.8 billion; the next year they exited another third for $2.8 billion. The exit has been called one of the most profitable private equity deals of all time.

Shinsei provides both individual and institutional banking services; on the individual side it offers retail banking, housing finance, credit cards, unsecured loans, while its institutional business includes structured finance, advisory services, and global markets business. The individual business reported JPY156 billion in revenue for the year ended March 2019, compared with JPY67.4 billion for the institutional business; however, the institutional side had higher profit margins, with JPY28.7 billion in profit for the same period as opposed to JPY23.3 billion for the individual side.

Total revenue for the year came to JPY229.6 billion, down from JPY232 billion the year before. Over the same period net profit grew from JPY51.4 billion to JPY52.3 billion.

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• Topics
• North Asia
• Open market
• Financials
• Japan
• J.C. Flowers & Co.
• J. Christopher Flowers
• Exit
• Financial Services