Flowers offers $1.8b for stake in Shinsei Bank

Christopher Flowers, the banker who helped create Shinsei Bank Ltd in Japan's first financial buyout, is leading a group that will offer 202 billion yen ($1.8 billion) for a stake in the company after its shares slumped 44 percent.

JC Flowers & Co LLC and unnamed investors will pay 425 yen a share, to increase their stake to as high as 32.6 percent, the Tokyo-based bank said in a statement yesterday. Shinsei will sell 50 billion yen of new shares as part of the transaction, made at a 17 percent premium to Monday's closing price.

The funds will bolster Shinsei after it reported the first loss since Flowers and partner Timothy Collins acquired the then bankrupt bank from Japan's government in 2000. Flowers is also in talks to purchase Northern Rock Plc, the UK mortgage lender that was bailed out in September by the Bank of England.

"Flowers has the know-how to help existing firms improve their businesses, so this is good for Shinsei," said Junsuke Senoguchi, a Tokyo-based analyst at Lehman Brothers Holdings Inc. "Shinsei may suffer more losses from consumer-finance affiliates."

Shinsei has been posting losses at its Aplus Co and Shinki Co units after the government and courts reduced the maximum interest rate they can charge consumers for loans.

The bank also reported losses related to investments in US subprime mortgages to borrowers with poor credit.

The bank's shares rose as much as 13 percent to 412 yen on the Tokyo Stock Exchange and were trading 11.8 percent higher as of 12:55 pm.

Flowers, a former Goldman Sachs Group Inc partner, and Ripplewood Holdings LLC founder Collins, led an investor group that bought Long-Term Credit Bank of Japan Ltd for 121 billion yen in 2000, renaming it Shinsei. It was the first acquisition of a Japanese bank by overseas investors.

The group sold two-thirds of the bank to investors since 2004 for 532 billion yen in what Carlyle Group co-founder David Rubenstein labeled the "most successful" private equity deal in history.

Bloomberg News

(China Daily 11/21/2007 page16)