UFJ group to sell ailing Aplus to foreign firm

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The UFJ group is in the final stages of talks with several foreign financial institutions, including Citigroup Inc. of the United States, to sell struggling consumer finance affiliate Aplus Co., sources close to the talks said Saturday.

The major banking group, led by UFJ Holdings Inc., is expected to decide on a buyer for the Osaka-based finance company by the end of July, the sources said.

Other foreign entities interested in buying Aplus are the HSBC group of Britain and GE Capital Corp. of the United States, the sources said.

In a deal expected to be worth about 100 billion yen, the UFJ group is considering removing unprofitable divisions such as real-estate backed lending from Aplus and selling its healthy operations such as consumer loan and credit card businesses to a foreign firm, the sources said.

The deal would mark the UFJ group’s first serious effort to deal with the problems of large-lot borrowers.

UFJ Holdings, which is lagging behind other major banking group in disposing of bad loans, has said it will step up disposal of such loans extended to large-lot borrowers during fiscal 2004.

Major banks, including UFJ, are required by the Financial Services Agency to slash their bad loan ratios by half in the three-year period to March 2005 to help stabilize the nation’s financial system.

The UFJ group owns a roughly 40 percent equity stake in Aplus, one of the group’s large borrowers.

Other large borrowers of the UFJ group undergoing rehabilitation include retail chain Daiei Inc., condominium builder Daikyo Inc. and trading house Nissho Iwai-Nichimen Holdings Corp.

The outstanding balance of loans extended by UFJ Bank and UFJ Trust Bank to Aplus comes to 200 billion yen, accounting for more than 30 percent of Aplus’s 700 billion yen in interest-bearing debts.

Aplus, listed on the Osaka Securities Exchange’s first section, has about 60 branches in Japan. In fiscal 2003, it reported a group net profit of 1.48 billion yen on revenue of 107 billion yen.

The company has been under reconstruction as it has received 130 billion yen in financial assistance including debt waivers. But there are concerns that its financial standing could deteriorate if its loans secured by real estate continue to turn sour, banking analysts say.

In fiscal 2003, UFJ Holdings booked as much as 1.2 trillion yen in bad-loan disposal costs and reported a group net loss of 402.8 billion yen as a result.