Japan’s Ashikaga Bank sale attracts private equity sponsors

A planned auction of Ashikaga Bank, a Japanese bank revitalised by the government, is reportedly drawing interest from private equity groups including Lone Star.

Lone Star, a Texan fund manager waiting to net a $4 billion profit from the sale of Korea Exchange Bank, has been named as a potential bidder in the run up to an auction of Japan’s Ashikaga Bank.

Lone Star, General Electric and Nomura Holdings have been named as potential bidders for the bank the Japanese government rescued from mounting bad loans three years ago, according to a Bloomberg report quoting people with knowledge of the matter.

Ashikaga, with 150 branches and ¥4.2 trillion ($36 billion) of guaranteed deposits, could attract offers as high as $3.4 billion (€2.7 billion), Bloomberg sources said.

A spokesman for Financial Services Agency said: “A working group met yesterday to discuss the bank’s ownership. Before inviting bids, we need to set the terms first.” He expected the invitation to be issued in mid-October.

Ashikaga has been profitable since the government took it under its wing, and its bad loan ratio fell to 7.8 percent as of 31 March from 20.62 percent two years ago.

Kazuhiro Itoi, a spokesman at Ashikaga Bank told Bloomberg that overseas suitors may face local opposition. “There had been a reaction against foreign investors amid fears they may fire employees, cut loans to ailing companies and seek a quick profit.”

The spokesman at Financial Services Agency did not think there would be opposition to foreign fund participation in the upcoming auction.

Ripplewood Holdings’ $3.5 billion gain from Shinsei Bank sale consequently prompted the introduction in 2005 of ‘Shinsei tax’ – which imposes a 20 percent withholding penalty on capital gains on foreign buyout groups. This tax no longer applies to US investors. Lone Star has also made more than a sevenfold gain on its sale of Tokyo Star Bank in 2005.