Lone Star in creditors consortium to buy Tokyo Star Bank

Dallas-based Lone Star is reportedly among a number of lenders currently in talks with Japanese private equity firm Advantage Partners to purchase Tokyo Star Bank, which is currently held by a number of its affiliate funds.

Advtnage Partners is keen to discuss options over the debt package from its 2008 acquisition of Tokyo Star Bank, a source confirmed to PERE's sister magazine PEI Asia, adding that “nothing has been decided yet”.

But lenders are considering taking shares in the bank in exchange for the loan repayments, according to a Reuters report. An article in Japan’s Nikkei said Advantage would likely hand over all of its outstanding shares to the banking consortium.

Advantage Partners declined to comment.

Media reports since Q4 last year have stated that the company has been struggling to meet the repayments due on the ¥169.6 billion (€1.47 billion; $2.05 billion) in mezzanine and senior loans put together for its ¥252 billion ($2.2 billion at the time) acquisition by Advantage Partners, which was agreed in 2007. In October last year, Advantage Partners reportedly hired Nomura Holdings to seek out an additional investor for Tokyo Star in order to pay down the debt.

The banking syndicate on the deal includes about 20 lenders, headed by lead arrangers Credit Agricole and Japan’s Shinsei Bank. In addtion to Lone Star Funds, Aozora, the Japanese lender, is reportedly also among the syndicate members.

Tokyo Star’s core lending business is believed to be healthy, accoridng to a reporty by the Financial Times. But legacy investments including real estate loans, have become non-performing as Japan's real estate market falters, resulting in a loss of Y2.7bn in the year to March, 2010 and a further loss of Y3.1bn in the first half of the current year to March, 2011.

While Advantage Partners may be struggling with Tokyo Star Bank, the Tokyo-headquartered firm has been actively divesting its 2006 investment in other businesses, such as Rex Holdings. Earlier this month, Advantage Partners also sold all of its shares in Red Lobster Japan to Tokyo-based restaurant operator CELUX for an undisclosed amount. Red Lobster Japan was 100 percent owned by food chain operator REINS International, which is a subsidiary of Rex Holdings.

Additional reporting by Jonathan Brasse.