Re: Ripplewood Holdings (stems from Chi. Tribune on Enron)

["Charles Jannuzi" <jannuzi@xxxxxxxxxxxxxxxxxxxxxxxxx>]

What does Ripplewood know about running a credit bank in Japan? Pt. 1

The Ripplewood plan is simple actually: use high equity valuations and
inflated asset prices  in the US and an ability to operate as largely
unregulated capital worldwide to buy up and profit from distressed Asia
(Asia post 1997). The real beauty in the strategy is this: quite literally
by becoming a holding company for banks in Asia, Ripplewood can use Asian
savings (bank liabilities) to buy up Asia's own assets (loans, distressed
assets such as failed companies that are not very leveraged but can't make
loan payments , real estate, etc). Carlyle Group has made a similar move
into Korea, and the others giants of privately held capital are circling the
drain. Softbank got involved in a similar set up with the failed Japan
Credit Bank, but it looks now more and more like the JCB will end up in the
hands of a French capital group because Softbank, always dependent on high
stock valuations, has none. This is a new twist on disintermediation: take
over an Asian bank in order to invest Asian depositor's money in distressed
Asian assets and keep all the profits. Quite literally, trust banks have
become investment banks for privately held capital.

The problem is the nature of the bank Ripplewood acquired. First, it had big
connections with the Japanese economy and MofF. Second, what Ripplewood did
was supposed to be a 'showpiece' for financial reform and liberalization.
But third, they took over a credit bank, a bank that is given tax breaks but
a special mission--that mission is to make more loans to small and medium
sized businesses than even credit unions or savings and loans would think
of. It's a huge nationwide entity with a huge amount of deposits. Therefore,
considering what Shinsei Bank (was Long Term Credit Bank) is supposed to be
doing and what it is actually doing, and considering the huge amounts of
breaks that Ripplewood got in launching Shinsei, people are angry with how
it's actually turned out. US advice to the Ripplewood people is for them to
get better at lying about what they are actually doing. Here is the
background, starting from 1999.

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   http://www.weeklypost.com/990927/990927c.htm#popular

LTCB Acquired by US Investment House

Japan Long-Term Credit Bank (LTCB) has been under the management of the
Japanese government since it has created about $26 billion debt [Note from
Jannuzi: this is tiny actually compared to its deposits] in last October.

Now, it was decided that LTCB was going to be acquired by Ripplewood
Holdings, the US investment house.

The acquisition will have a major effect on LTCB's major clients such as
Daiei, a supermarket giant, Sezon Group, Sogo Department Store, Kumagai
Construction Co. and Hazama Construction Co [Note from Jannuzi: this list is
a bankruptcy hall of shame now]. These Japanese companies have huge loans
from LTCB.

Financial specialists are now predicting that Ripplewood request for
repayment of these loans and these Japanese companies will have to go to
bankrupt. More than 200,000 employees will be involved in their bankrupt and
layoffs will cause panic in Japan [Jannuzi: and delight for vulture
capital].

Posted by Charles Jannuzi