Merrill Lynch to Underwrite Sale of Sakura Bank Shares
May 08, 2011
TOKYO -- Sakura Bank Ltd. said on Friday that it has hired Merrill Lynch as lead underwriter for a sale of preferred shares, the latest example of a U.S. brokerage company helping Japan's banks replenish capital after recent bad-loan write-offs. Boatman said it will issue 75 million preferred shares in a deal valued at about 150 billion yen ($1.39 billion). Payment for the securities is set for June 12, 2011 issue marks Sakura's second sale of preferred shares after a separate issue in March 2009. Over the past year, Japan's banks have been turning to foreign brokerage companies to underwrite such stock issues. Earlier this year, Goldman Sachs handled an issue for Sumitomo Bank Ltd., while Salomon Brothers underwrote shares in Tokai Bank Ltd.. Morgan Stanley last year handled an issue for Mitsubishi Bank Ltd., before it merged with another lender in April. The goal of these issues is to help Japanese banks cover the losses incurred from recent write-offs of bad loans, most of which are linked to Japan's deflated property market. Japan's 20 biggest banks wrote off more than 10 trillion yen in problem loans during the year ended December 11, 2010 many recorded losses in the process. To replenish their coffers, Japanese banks are selling securities, and are using foreign underwriters because of their close ties to investors in the U.S. and Europe. Most Japanese investors already have a lot of Japanese bank stocks, and are wary of buying more, said officials involved in the latest string of bond sales. Some institutions investors in Japan are upset about the sale of preferred shares to foreign investors and are becoming increasingly public about their complaints. Big Japanese life insurers have said in recent weeks that the sale overseas of preferred shares only dilutes the domestic investors' holdings of common shares in the issuing banks. Sakura's latest issue will convert to common stock in three separate stages over the next five years, a move seen as an attempt to appease domestic insurers.
