Distressed investor Cerberus’ efforts to sell its troubled stake in Aozora Bank have been further sidetracked following news that the Japanese government could become the bank’s second biggest shareholder.
The government owns preference shares in Aozora, which it bought when it nationalised the bank’s predecessor Nippon Credit in 1998 before exiting a large interest to investors including Cerberus, the Financial Times reported on Friday.
A significant number of those shares must be converted into common shares on 3 October, which would subsequently give the government 20 per cent of the voting rights in the bank, the report said, which all parties would rather avoid.
Aozora was recently in talks with the government and shareholders to repay part of the government’s funds as quickly as possible, reflecting the bank’s efforts to avoid a situation whereby the government would become its second biggest shareholder.
Analysts say Cerberus will want to prevent conversion of the shares because having the government as a significant shareholder would make Aozora less attractive to prospective buyers, the report added.
Australia and New Zealand Banking Group ended discussions to buy Cerberus’ 55 per cent stake in the bank in September last year after the two parties failed to agree on a price.
Cerberus bought its stake in Aozora in 2003 and has had difficulties with the acquisition ever since.
Aozora lost 80 per cent of its value after Cerberus took it public in 2006, and a further $930m in losses from investments in hedge funds and other toxic assets following the Lehman fallout.
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