The Shinsei Bank IPO will raise $2.36 billion, after the issue was priced by lead managers Morgan Stanley and Nomura at Yen 525 per share, the top of the indicated range, for the start of trading on 19 February. The former Long Term Credit Bank of Japan (LTCB) is the first Japanese bank to be nationalised, sold to a private buyer and then floated on the market, and its example is expected to encourage other troubled banks to find a similar path out of their difficulties.
Shinsei is offering up to 35 per cent of its 1.36 billion outstanding common shares, with 440 million existing shares and 36.3 million additional shares earmarked under a “greenshoe” option made available for the massively oversubscribed issue. Japanese institutional investors applied for 40 times the number of shares allocated; international investors 27 times, and Japanese retail investors 12 times.
Shinsei became Japan’s first foreign-owned bank in 2000 when the failed LTCB was bought by a consortium led by US investment fund Ripplewood Holdings and relaunched. The IPO is worth more than double the Yen 121 billion that the Ripplewood consortium paid for LTCB. The consortium is retaining a majority stake in the bank.
The Japanese government spent Yen 240 billion in public funds to bolster Shinsei’s capital when it was founded, on top of Yen 3.6 trillion used to eliminate LTCB’s bad loans before it was sold to Ripplewood. The other shareholders include Mellon Bank, GE Capital, Deutsche Bank and Citigroup. At 525 yen per share and with 1.36 billion in common shares outstanding, Shinsei’s market capitalisation will equal that of the recently bailed-out Resona Holdings, capitalised at about 701 billion yen. By assets, Resona is Japan’s fifth-biggest bank.
Since its launch, Shinsei has become known for a hard-nosed, profit-oriented, Western approach to banking. It has aggressively shed problem loans using a special deal given when the bank was denationalized that allowed it to sell to the government any loan whose value had fallen more than 20 per cent. The government has spent nearly Yen 1 trillion yen to buy them back.
Shinsei will be profitable this year. It is the first IPO by a Japanese bank since Tohoku Bank raised Yen 1.4 billion in March 1997.