Talks broke down Wednesday between the Financial Reconstruction Commission and a consortium led by leading Internet investor Softbank Corp. on buying the defunct Nippon Credit Bank, the FRC said.
With the breakdown, the consortium’s priority rights to negotiate the purchase of the long-term credit bank have expired, said the FRC, the regulatory body of Japan’s banking industry.
In late February, the FRC announced it had given the consortium — which also includes leasing company Orix Corp. and nonlife insurer Tokio Marine & Fire Insurance Co. — first shot at negotiating the purchase.
The May 31 deadline for concluding purchase terms was set after the FRC and the consortium earlier failed to reach a deal by the initial April 30 deadline.
With the second deadline missed, the FRC will now revive talks with a U.S. investment fund and others that have expressed interest in acquiring NCB, FRC officials said.
The insurmountable hurdle between the FRC and the Softbank-led consortium was how much NCB should set aside to cover loan losses for corporate borrowers on the verge of bankruptcy, the officials said.
NCB was put under state control in December 1998 after incurring huge loan losses.
The consortium may still purchase NCB but is now on a level playing field with the other would-be owners.
Until the fall of 1998, Japan had three commercial long-term credit banks. But two of the three were nationalized in late 1998 after instability erupted in the financial system: NCB and the Long-Term Credit Bank of Japan.
LTCB was sold March 1 to an international consortium led by U.S. fund Ripplewood Holdings LLC.
However, with LTCB facing a spate of requests from large-scale borrowers for debt forgiveness, concern among members of the Softbank consortium about the financial health of NCB’s borrowers has deepened.
One of LTCB’s borrowers, Dai-Ichi Hotel Ltd., is asking for court protection for its assets from LTCB and other creditor banks.
The government had planned to eliminate most of NCB’s 3.19 trillion yen negative net worth with an injection of public funds.
Softbank, meanwhile, has seen its own shares plunge in value since February due to investor anxieties about its outlook. Softbank, led by Chairman Masayoshi Son, has Yahoo Japan Corp. among its group of companies.