Cerberus’ Aozora sale stalled

The Japanese government owns preference shares in the bank, which it acquired when it nationalized Nippon Credit Bank, as Aozora was formerly known, in 1998. It then sold off sizable stakes to investors such as Cerberus in 2003.

If the bank does not repay the government's funds in time, a chunk the preference shares will be converted into common shares on October 3, which would give the state a fifth of the voting rights in Aozora, according to the Financial Times.

Industry participants believe that Cerberus, which owns 55% of Aozora's voting rights, will be against the conversion of the preference shares, because having the state as a major shareholder could deter prospective bidders for the asset. It is an apt example of the challenges facing PE firms that acquired Japanese companies but neglected to sell them before the recent economic crisis.

Aozora President Brian Prince revealed last week that the bank is in negotiations with the government and shareholders to partially repay public funds at the earliest date possible.

"Aozora wants to cut its ties to the government, and if the shares are converted that will become difficult," commented Hironori Nozaki, a banking analyst at Citigroup in Tokyo.

Last September, Australia and New Zealand Banking Group ended discussions over a potential investment in Aozora, because it could not agree on some key terms with Cerberus.

Cerberus currently holds a 49.8% stake in the bank. In 2009, merger negotiations took place with Shinsei Bank, which is owned by JC Flowers, but they couldn't agree on a deal.

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• Topics
• North Asia
• Financials
• Exits
• Exit
• Japan
• Financial Services
• Cerberus Capital Management