Cerberus, TPG among 5 on Takefuji shortlist: sources

TOKYO (Reuters) - Cerberus Capital Management CBS.UL, TPG TPG.UL, Tokyo Star Bank, J Trust Co 8508.OS and Korea's A&P Financial have advanced to the final round of bidding for failed Japanese consumer lender Takefuji, four sources with direct knowledge of the deal said.

The five suitors will submit offers for Japan’s No.4 consumer finance lender in a second and final round of bidding at the end of February, the sources told Reuters on condition they were not identified because the information is not public.

Buyout firms Fortress FIG.N, Lone Star LS.UL and Elliott Management were among those eliminated in a first round of bidding last month, the sources said.

Bidders are planning to offer between 60 and 80 billion yen (between $723 million and $963 million) for the lender, sources said.

Takefuji failed in September owing 433 billion yen ($5.22 billion), its profitability squeezed by a government cap on lending rates and a 2006 court ruling forcing it and other consumer lenders to repay overcharged interest.

TPG, Cerberus, J Trust and Tokyo Star all declined to comment. An official at A&P Financial said on Wednesday the firm had never planned to bid for Takefuji.

Luring the five potential buyers is the chance to grab Takefuji’s asset portfolio at a discount and the opportunity to swiftly enter or expand unsecured lending to individuals and small businesses in Japan through Takefuji’s existing customer base, the sources said.

But the bidders cannot be optimistic about Takefuji’s business outlook. Players in the industry are struggling to survive after Japanese courts ruled they had charged too much interest and must repay borrowers.

Even Acom Co 8572.T and Promise Co 8574.T, which have financial backing from Japanese major banks, face tough times.

Credit rating company Standard & Poor’s cut credit ratings for both on Tuesday, citing downward pressure in their profitability and cash flow.

“Declines in both companies’ outstanding operating loans are widening, while refunds of overcharged interest remain high,” S&P said in a statement.

Aiful Corp 8515.T, another consumer lender, sought to reschedule debt repayments in 2009 through an out of court process known as "alternative dispute resolution" or ADR.

Takefuji was Japan’s largest consumer lender to fail since the 2006 court ruling change.

Takefuji’s administrators want to make sure potential buyers are serious about holding onto the business and that they are not bidding simply out of interest in the firm’s outstanding loans, sources have told Reuters previously.

Takefuji could face claims of as much as 2 trillion yen from about two million customers, a Takefuji lawyer involved in the bankruptcy filing told reporters when the filing was made.

But that is expected to be greatly reduced, the sources said, adding that financial details on Takefuji are not available so it is hard to gauge the price.

Still the sources expect the bulk of Takefuji’s corporate borrowing to be forgiven as part of any deal.

Shinsei Bank 8303.T is acting as an adviser on the sale.

Additional reporting by Taro Fuse in Tokyo, Ju-min Park in Seoul and Megan Davies in New York; Editing by Michael Watson