Cerberus-backed Aozora unveils plan to repay bailout cash

Aozora has come under pressure to release a repayment plan because most of the government's preferred shares in the bank are scheduled to convert into common shares in October, massively diluting shareholder value, Reuters reported. The lender has agreed to buy back JPY22.7 billion in preferred shares by March 2013 and then settle the remainder within 10 years.

The plan is subject to shareholder approval.

Aozora, formerly known as Nippon Credit Bank, was effectively nationalized in 1998 as Japanese banks struggled with non-performing loans tied to the bursting of an asset bubble. Stakes were subsequently sold off to investors, including Cerberus, which entered in 2003 and currently owns 49.8%.

The private equity firm has explored exit opportunities several times in the last three years. In 2009, merger negotiations with Shinsei Bank, which is owned by J.C. Flowers, broke down. Last year, talks with Australia and New Zealand Banking Group also floundered because the parties couldn't agree on key terms.

Uncertainty over whether Aozora would meet the repayment deadline was a source of further concern, as the conversion of preferred to common shares - making the government a major stakeholder in the entity, with one fifth of the voting rights - might put off potential buyers of Cerberus' interest. The private equity firm controls 55% of Aozora's voting rights.

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