March 31, 2008 / 3:25 AM / 12 years ago

Japan regulator eyes Aozora links to Cerberus - FT

TOKYO (Reuters) - Japan’s financial regulator is examining ties between Aozora Bank (8304.T) and top shareholder Cerberus Capital Management [CBS.UL] to see if the U.S. private equity firm has put pressure on the bank to finance deals, the Financial Times said on Monday.

Aozora, which owes the Japanese government almost 180 billion yen ($1.8 billion) following a bailout in the 1990s, has been hurt by soured U.S. mortgage investments, including some arranged by Cerberus.

The bank’s shares have lost more than a third of their value since it listed in 2006, although Cerberus is still investing — with a plan to raise its stake to 46 percent.

A spokesman for Aozora, Tsutomu Jimbo, declined to comment on the report, as did the head of the regulatory Financial Services Agency.

“I cannot comment on individual cases ... but as a rule, banks and their major shareholders are expected to keep at arm’s length from each other in their businesses,” FSA Commissioner Takafumi Sato said at a regular briefing.

“If a company or an investment fund becomes a major shareholder, they are expected to maintain the independence of the bank’s management,” Sato said.

Aozora was part of a Cerberus-led group that in 2006 bought a 51 percent stake in GMAC LLC, the financing arm of General Motors Corp (GM.N).

But since Aozora’s $500 million investment, the mortgage crisis has eroded earnings at GMAC, which lost about $2.3 billion in 2007. That forced Aozora to halve its full-year earnings target in January.

Aozora has since reshuffled its top management, replacing its chief executive, a veteran Japanese banker, with 57-year-old Federico Sacasa, who was already serving as the bank’s president.

Domestic media has speculated that former CEO Kimikazu Noumi may have clashed with Cerberus.

Noumi, still the bank’s chairman, is expected to leave Aozora in the near future due to disagreements about the bank’s direction, the Financial Times also said.

Aozora said this month that Cerberus would pay up to 42.9 billion yen to raise its stake in the bank to nearly 46 percent, from around 38 percent.

Cerberus took Aozora public in 2006 after buying its failed predecessor, Nippon Credit Bank.

Since then its shares have fallen almost 40 percent, hit by concerns about exposure to the subprime market. The shares fell 4.2 percent on Monday to 296 yen.

($1=98.94 Yen)

Editing by Michael Watson

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