Shinsei yields second windfall

Ripplewood Holdings and other investors have announced their intention to sell a further 34 percent stake in Shinsei, the Japanese bank that delivered them an initial fortune early last year.

US buyout firm Ripplewood Holdings and other members of a consortium have announced they are selling a further 34 percent stake in Japan’s Shinsei Bank. According to a report in the Financial Times, the investors will offer 462.9 million shares currently worth a total of around 290 billion yen ($2.83 billion; €2.19 billion).

The share sale is being run by Morgan Stanley, Nikko Citigroup and Nomura Holdings, which are expected to place the shares with domestic and overseas investors as early as February 7. The total number of shares for sale may be increased by a further 38.2 million depending on the level of demand.

The investor consortium – which also includes Deutsche Bank and General Electric Co – sold an initial 33 percent stake in Shinsei when the company was listed on the Tokyo Stock Exchange in February 2004. That sale delivered total proceeds of 231 billion yen ($2.1 billion; €1.7 billion). 

With the share sales expected to deliver in excess of 500 billion yen in total, Shinsei is continuing to live up to its reputation as one of the most lucrative private equity deals of all time. When the Ripplewood-led consortium acquired the business then known as Long Term Credit Bank of Japan in 2000, it paid just 121 billion yen ($1.2 billion). After the latest sale, the consortium will still retain an approximate one-third stake in the company.

Despite being hailed as a seminal deal in the fledgling Japanese buyout market, Shinsei has caused controversy in Japan. Prior to the buyout, the government had pumped 7.86 trillion yen ($72 billion) of taxpayers’ money into the company to mop up bad loans. Adding fuel to the fire, the consortium then avoided capital tax gains on their post-IPO profits thanks to the exploitation of a tax loophole.