On Feb. 19, 2004, Shinsei Bank became the first bank in Japan’s history to be re-listed on the Tokyo Stock Exchange. This came after collapsing and being revived by its new owners, Ripplewood Holdings.
On that date two years ago, the Ripplewood-led consortium floated about half of its 67% stake in the bank at an issue price of 525. The group’s total take on the IPO was about $2.3 billion, twice its original investment. By the end of the first day of trading, Shinsei’s shares were trading at 827, a 58% premium on the offering price.
For the 2000 buyout, Ripplewood assembled a heavy hitting international investment consortium reported to include AIG, Citigroup, GE Capital, Mellon Financial Corp., UBS, ABN AMRO, Banco Santander and Deutsche Bank.
New York-based Ripplewood’s bid beat out a duo of local Japanese banks-Chuo Trust & Banking Co. and Mitsui Trust & Banking Co.-whose home-court advantage, coupled with Japan’s history of keeping its businesses under local control, reportedly had them in the lead for much of the Goldman Sachs-run auction. But Ripplewood prevailed in March 2000, the first foreign firm to have ever gained control of a major Japanese financial institution.
Ripplewood renamed the bank Shinsei, which means “rebirth” or “new life.” It was formerly known as Long-Term Credit Bank (LTCB). LTCB was one of Japan’s three major banks specializing in long-term lending to businesses. But LTCB, like many other Japanese banks, overextended its real-estate financing during Japan’s 1980s bubble economy. By fiscal year 1998, the bank reported an unconsolidated pretax loss of about 1.6 trillion (more than $15 billion). In October that year, LTCB was temporarily nationalized, cleaned up a bit by the government and put on the auction block.
Ripplewood faced opposition to some of its restructuring moves, including selling bad loans to the government and a newly minted business style more aggressive than traditional Japanese culture favored. It also outfitted some of Shinsei branches with their own, built-in Starbucks.
But before taking it public four years after its purchase, Ripplewood got the company back on track, announcing net profit of 61.2 billion and a bad-loan ratio of 20.8% for the fiscal year ending March 2002. A year later it reported a net profit of 53 billion and a slashed bad-loan ratio of just 5.7 percent.