taiwan begins to clean up its npls
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Taiwan Begins to Clean Up its NPLs. M ay 24, 200 2. Y AMATO S ERVICING K.K. Table of Contents. Introduction to Yamato Servicing K.K. Outline of Cerberus Group Comparison of NPLs Precedent in USA and in Japan Necessity for Taiwan to Quick Resolve NPLs How to Liquidate NPLs? - PowerPoint PPT PresentationTRANSCRIPT
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Taiwan Begins to Taiwan Begins to Clean Up its NPLsClean Up its NPLs
MMayay 24, 200 24, 20022
YAMATO SERVICING K.K.
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Table of Table of Contents
Introduction to Yamato Servicing K.K. Outline of Cerberus Group Comparison of NPLs Precedent in USA and in Japan Necessity for Taiwan to Quick Resolve NPLs How to Liquidate NPLs? Benefit of 3rd Party Servicer Role of Servicer Work Flow of Servicer Resolution Method of Servicer Market Volume of Servicing in Japan Comparison of Japanese Servicer Rating Outline of Yamato Servicing K.K.
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Leading special servicer in Japan Servicing portfolio
UPB JPY2.3 trillion (US$18 billion) Clients
Cerberus, overseas private equity funds and Japanese mega financial institutions.
Staffs/Offices 50 staffs, with 10 to 25 years’ servicing experience.
Servicer Rating CSS2-
Yamato Servicing K.K. is at the top of the rated servicers in Japan.
History Incorporated in April 1999.
Shareholder Yamato is one of the Cerberus Group companies.
Introduction to Yamato Servicing K.K.Introduction to Yamato Servicing K.K.
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The leading long-term fund in the world in the niche market of corporate restructuring and distressed asset management.
It has approximately $8 billion under management and has invested over US$ 25 billion during the last 10 years
Cerberus is one of the largest managers of NPLs in Japan and Korea (approximately $30 billion of NPLs in Asia alone)
In Taiwan, Cerberus acquired the first pool of distressed debt sold through public auction.
Cerberus is in active discussion with the Government about how Cerberus can further contribute to financial sector recovery.
Outline of Cerberus GroupOutline of Cerberus Group
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Consig
nInvestment
^^
Capita
l
Cerberus Fund
Banks
Insurance Companies
Pension Funds
Fund of Funds
Banks
Insurance Companies
Pension Funds
Fund of Funds
Institutional Investors
Wealthy Individuals
Institutional Investors
Wealthy Individuals
Recovery FundRecovery Fund
Financing CompanyFinancing Company
Property FundProperty Fund
Financing FundFinancing Fund
Asia FundAsia Fund
Cerberus Capital Management L.P.
Cerberus Asia Capital Management LLC, etc.
【 Investment in Taiwan, Japan and in Asia 】
Cerberus Capital Management L.P.
Cerberus Asia Capital Management LLC, etc.
【 Investment in Taiwan, Japan and in Asia 】
Fund Investors
Amount;USD 8 Billion
InvestmentIn Asia
Performing LoansPerforming LoansEquityEquityPropertyProperty
MBOMBO MBIMBI
Corporate RecoveryCorporate Recovery Corporate Corporate ReorganizationReorganization
FinancingFinancing Bad LoansBad Loans
Cerberus GroupCerberus GroupCerberus, established in USA in
1992, is one of the largest private
equity fund in the world specializing in
corporate restructuring.Cerberus family of funds currently
consists of 11 different funds and
separate accounts.Funds under its management is USD
8 bill, of which USD 3 billion is for Asia
including Taiwan.
Outline of Cerberus Group 2Outline of Cerberus Group 2
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Taiwan (as of Sept 2001)Taiwan (as of Sept 2001) Total Bank Lending : NT$14 trillion (US$412 billion ) Bad Assets : NT$ 1.1trillion (US$32 billion) Bad Assets Ratio : 7.8% (MOF base)
Japan (as of Sept 2001)Japan (as of Sept 2001) Total Bank Lending : JPY485 trillion (US$3.7 trillion) Risk Control Assets : JPY35.7 trillion (US$275 billion) Risk Control Asset Ratio : 7.4% Some source estimates that real bad asset ratio is 10
times higher than the ratio stated above.
vs
Comparison of NPLs (Taiwan vs Japan)Comparison of NPLs (Taiwan vs Japan)
NPLs: Non performing loans
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What happened in USA?What happened in USA? By 1989, 750 S&Ls were bankrupted due to high NPL
ratios. In 1990, RTC was incorporated to purchase S&L’s
NPLs. RTC was dissolved in 1995 when its mission was
over by selling NPLs to investors (who then consigned servicing to servicers).
It is widely believed, that major reason of quick resolution of S&L problem was utilization of private equity funds and servicers who are specialists of investment and collection.
Precedent in USA and in JapanPrecedent in USA and in Japan
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What happened in Japan?What happened in Japan? 12 years since bubble economy burst. In the past 8 years, JPY68 trillion yen (US$523
billion) bad assets were resolved, according to Japanese Government’s statistics.
Bulk sale of "Category 4" loans (bankrupted borrowers) started in 1997, then proceeded to bulk sale of "Category 3“.
Resolution of "Watch list" borrowers has just started. Since 1998, series of new legislations were
promulgated to resolve NPLs, of which Servicer Law is one of the most important.
Even today, as much as JPY35.7 trillion (US$275 billion: it is believed to be understated) bad assets are still booked at Japanese banks’ balance sheets.
Precedent in USA and in JapanPrecedent in USA and in Japan
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What if resolution on NPLs will be postponed?What if resolution on NPLs will be postponed? Banks’ unable to extend new loans High bankruptcy rate More bad assets Higher unemployment rate Economic downturn Weaker currency Lose creditworthiness to foreign investors
Advantage of Taiwan in resolving NPLsAdvantage of Taiwan in resolving NPLs Low public sector debt – 30% of GDP (2000.12)
(Japan’s ratio is 125%), strong fundamentals. Injecting public money is not a heavy burden for
Taiwan Beneficial to taxpayers in the long term.
Necessity for Taiwan to Quick Resolve NPLsNecessity for Taiwan to Quick Resolve NPLs
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MethodMethod Nationalization followed by Government’s
Sale of banks, bulk sale of loans, and sale of individual loans
Private sector’s conducting the same as above
ProcessProcess Due Diligence
Evaluation of loans and collaterals Income approach, cost approach, sales
comparison approach Discounted cash flow method
Submission of pricing Documentation Closing (assignment of loans and collaterals) Servicing by assignee’s servicer starts
How to Liquidate NPLs?How to Liquidate NPLs?
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Independence No inter-creditor conflicts No long standing client
relationship
Specific experience Knowledge on cash flow
lending, etc.
Modern IT systems Capital availability
Benefit of 3Benefit of 3rdrd Party Servicer Party Servicer
Licensed Servicers in JapanLicensed Servicers in Japan Specialized in Asset Management an
d Loan Collection. Incorporated in accordance with
“Servicer Law” (1998, No.126) -Servicer Law v.s. Lawyers Law
One of the directors must be a lawyer.
Limited Liability Companies with paid in capital not less than JPY 500 million (US$3.8 million)
Regulatory Audit by Ministry of Justice under Servicer Law.
As of May 2002, 65 Servicers have obtained permission from Minister of Justice.
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Due diligence Closing procedures Collection Cash management Property management for REO (credit bid) properties Monitor asset portfolios Reporting
Role of ServicerRole of Servicer
Expertise of ServicerExpertise of Servicer Collection Legal execution procedure Finance Property management Information technology M&A Accounting
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DueDiligence
DueDiligence
Cash Flow Management
Cash Flow Management
Performance Monitoring
Performance Monitoring
Finance & IT TeamFinance & IT Team
CollectionActivities
Collection Team Collection Team InvestorsInvestors
From Entrance to Exit of Investment
Work Flow of ServicerWork Flow of Servicer
Legal Team Legal Team Property TeamProperty Team
REO PropertyManagement
REO PropertyManagement
Cash &
Information
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Private auction
Legal proceedingsAttachmentForeclosureArbitration
Seek Best Solution for Investors and BorrowersSeek Best Solution for Investors and Borrowers
Voluntary sale
Refinancing
Corporate restructuringDebt equity swapFresh debt and/or equityDip financing
Discounted pay-off
Resolution Method of ServicerResolution Method of Servicer
Loan restructuring
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27
3642
51
61
0
10
20
30
40
50
60
70
Dec- 99 J un- 00 Dec- 00 J un- 01 Dec- 01
Number of Licensed Servicing Company Number of Loan Served
1.46
2.46
4.00
0.160.150
0.5
11.5
22.5
33.5
44.5
Dec- 99 J un- 00 Dec- 00 J un- 01 Dec- 01
UPB
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13.619
51
36
0
10
20
30
40
50
60
Dec- 99 J un- 00 Dec- 00 J un- 01 Dec- 01
(in trillion yen)Collected Amount
139
2,127
810
1,388
348
0
500
1000
1500
2000
2500
Dec- 99 J un- 00 Dec- 00 J un- 01 Dec- 01
(in billion yen)
Market Volume of Servicing in JapanMarket Volume of Servicing in Japan
Source: Ministry of Justice
(in million)
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Fitch/ IBCA
Full Approval with OverallSuperior Performance
Yamato Servicing K.K.(2001/ 10/ 19) [2-]
Minato Saiken Kaishu (2001/ 10) [2+]Premier Servicing (2001/ 12) [2-]
IR Loan Servicing(2002/ 03 [3+])Global Servicing (2002/ 01 [3) +]Capital Servicing (2001/ 12) [3+]Lend Lease Servicing 2001/ 07 [3]( )Tokyo Saiken Servicing 2001/ 05 [3]( )
Tokyo Saiken Servicing2001/ 05 [3]( )
Sanyo Shinpan Servicing(2001/ 09 [3) +]IR Loan Servicing(2002/ 03 [3])
Qualified Approval
Conditional Approval
No Rating
※ Number between parentheses [ ] represents level of rating
Asset Backed Loan Special Servicer
Type
Rating
Full Approval withNoted Strength
Full Approval
Commercial Special Sevicer Residential Special Servicer
S & P
Strong(Extremely High
Capability)
Below Average(Capability with Some
Insufficiency)
Weak(Insufficient Capability)
No Rating
Above Average(High Capability)
ORIX Asset Management &Loan ServicesSMBC Loan ServicingSumitomo B/ K( )
Type
RatingSpecial Servicer
Sanyo ShinpanServicing
Commercial FinanceSpecial Sevicer Others
Average(Sufficient Capability)
SMBC BusinessServicing
Sakura B/ K( )
As of 2002/5/1
Comparison of Japanese Servicer RatingComparison of Japanese Servicer Rating
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Outline of Yamato Servicing K.K.Outline of Yamato Servicing K.K.
Leading special servicer in Japan Servicing portfolio
UPB JPY2.3 trillion (US$18 billion) Clients
Cerberus, overseas private equity funds and Japanese mega financial institutions.
Staffs/Offices 50 staffs, with 10 to 25 years’ servicing experience.
Servicer Rating CSS2-
Yamato Servicing K.K. is at the top of the rated servicers in Japan.
History Incorporated in April 1999, immediately after Servicer Law
was promulgated. Shareholder
Yamato is one of the Cerberus Group companies.
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Incorporation
Yamato Servicing K.K. (“Yamato”) was incorporated in 12th April 1999 by Mr. Stephen A. Feinberg, for the purpose of acting as a servicing company for collecting loans, entrusted by non-Japanese investors investing in distressed assets in Japan
Capital and Shareholding
500 million yen ( Stephen A. Feinberg 100 %)
Permission by Government
Yamato has obtained Permission under the Servicing Company Act 1998 (Effective 1st February 1999) from Minister of Justice on 1st July 1999. Permission Number is No. 14
Servicer Rating
Yamato obtained servicer rating, CSS2- from Fitch Ratings Limited in October 2001. Only few servicers are assigned CSS2- or above among more than 60 servicers in Japan.
Yamato is capable to provide professional/unified services on behalf of investors from the commencement to the exit of investment. The following are the characteristics of such services.
The first characteristic is to fully support due diligence upon investment made by investors. Yamato will enable investors to conduct an appropriate pricing, supported with our advice in accordance with our servicing experiences and the collection strategies based on our database. We believe that investors’ correct judgment at the time of investment is the first step for successful collection
1.COLLECTION EXPERIENCE AND NETWORK WITH EXTERNAL PROFESSIONALS Yamato has a network with external professionals concerning collection strategy development and conducting collection thereby. In addition to our internal professional staffs who have been engaging in collection services for 10 to 25 years, Yamato has a strong network with Shoichiro Niwayama Esq., our director and a senior partner of Asahi Law Offices and other legal professionals. Yamato, therefore, is capable of carrying out effective and appropriate collections 2. OUTSTANDING PERFORMANCE Since the commencement of its servicing business, Yamato has taken only 12 months to 18 months to recoup investors’ investment. This proves how capable Yamato is in developing collection strategy, in conducting collection, and how conscious Yamato is about time value for investors. 3. CONSIDERABLE SERVICING PORTFOLIO Yamato has a considerable servicing portfolio. Its servicing portfolio is approximately 2.3 trillion yen on an unpaid principal balance base, 5,000 borrowers and 10,000 loans, 130 investment pools. Such servicing portfolio is at the top level among the servicing companies in Japan. This shows that the investors have strong confidence in Yamato in all aspects of servicing, including due diligence support, collection, cash management, portfolio monitoring and reporting
Yamato’s Servicing Capabilities
1. Due diligence support
2.Servicing
Outline of Yamato
Yamato Servicing Yamato Servicing K.K.K.K.
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Identification and problem solving with borrowers Negotiate consensual resolution / restructuring
Maximizing Collection
Yamato Servicing K.K.’s Resolution PolicyYamato Servicing K.K.’s Resolution Policy
Try to let borrowers to survive More effective than letting borrowers to go bankrupt
and starting from scratch
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Yamato Servicing K.K. Tokyo Head OfficeYusen Building 7th Floor2-3-2 Marunouchi, Chiyoda-ku, Tokyo 100-0005Telephone: 81-3-3287-2100Facsimile: 81-3-3287-2101
Yamato Servicing K.K. Osaka Branch NM Plaza Midousuji 12th Floor3-6-3 Awajimachi, Chuo-ku, Osaka-shi, Osaka 541-0047Telephone: 81-6-6232-0606Facsimile: 81-6-6232-0607
Yamato Servicing K.K. Tokyo Head OfficeYusen Building 7th Floor2-3-2 Marunouchi, Chiyoda-ku, Tokyo 100-0005Telephone: 81-3-3287-2100Facsimile: 81-3-3287-2101
Yamato Servicing K.K. Osaka Branch NM Plaza Midousuji 12th Floor3-6-3 Awajimachi, Chuo-ku, Osaka-shi, Osaka 541-0047Telephone: 81-6-6232-0606Facsimile: 81-6-6232-0607
YYAMATOAMATO SSERVICINGERVICING K.K.K.K.
Toshikiyo ShimizuPresident of Yamato Servicing K.K.Telephone: 81-3-3287-2100 (ex 6411)Facsimile: 81-3-3287-2101E-mail: [email protected]
Toshikiyo ShimizuPresident of Yamato Servicing K.K.Telephone: 81-3-3287-2100 (ex 6411)Facsimile: 81-3-3287-2101E-mail: [email protected]