Orix to Raise US$1bn in Stock Raising to Repay Debt

Orix Corp, Japan's biggest leasing firm and a major property investor, said today it plans to raise about $1bn in a public share offering to fund investments and repay debt.

Orix said it will sell 18 million new shares to Japanese and overseas investors later this month, and invest some of the proceeds into real estate, to bolster its financial solutions business and to help it expand in Asia.

The share issue, which was first reported by Reuters yesterday, will increase its total number of shares by about 20%.

Orix becomes the latest Japanese company to tap the equity market for funds, encouraged by a near 40% rally in the Japanese stock market over the past four months amid investor hopes the economy has bottomed out.

Orix has been shrinking its asset base and slashing debt as fallout from the global credit crisis sliced into its profits and hit its balance sheet. But it has also been looking to take advantage of the crisis to buy assets cheaply.

The share offering will follow a ¥150bn convertible bond sale announced in November last year.

A capital raising of ¥100bn would improve Orix's debt-to-equity ratio to about 4,1 from 4,5, Nomura Securities estimates, helping allay concerns among some investors that it has relied too heavily on debt to finance its operations.

Orix was sitting on a total of ¥7,2 trillion debt as of March.

The announcement was made after the close of trade. Shares in Orix, which fell to a low around ¥1 700 in late February, closed at ¥5 490.

http://www.bdlive.co.za/world/asia/2013/02/20/orix-to-raise-1bn-for-investments-and-repay-debt#comments

Deconstructing the Olympus Scandal

Former Olympus CEO Michael Woodford’s flight from Tokyo in October and request for police protection in London was prompted by suspicions of yakuza involvement in the optics manufacturer.

Woodford claims his fears sprang from some lurid allusions in a FACTA magazine article published in late September to Cayman Islands-registered funds that had owned shares in three obscure, money-losing Japanese companies bought by Olympus: Altis, a medical waste disposal firm; News Chef, a maker of microwaveable plastic containers; and cosmetics firm Humalabo.

One of the Cayman funds was called Dynamic Dragon II. FACTA traced its origin to J Bridge Corp., an investment firm listed on the Second Section of the Tokyo Stock Exchange.

“This company is suspected of having a relationship with anti-social forces and is shunned by the capital market,” FACTA warned in its story.

“Authorities are still watching the movements of the former president, Toru Masuzawa, who ‘fled’ to Singapore,” the magazine claimed.

‘Anti-social forces’ is a Japanese euphemism for the yakuza.

The current CEO of J Bridge, which changed its name to Asia Alliance Holdings in 2010, is Kotaro Takamori. He strongly denies that J Bridge has any criminal connections or that it set up Dynamic Dragon, but confirms his company might have invested in the same special purpose vehicle (SPV) as Olympus.

“SPVs like Global Target or Dynamic Dragon have lots of sub-funds, so may be we invested in Dynamic Dragon sub-fund A, but Olympus used sub-fund B,” Takamori told me.


Some executives of J Bridge and the companies into which it has invested have committed crimes. However, an investigation I undertook for Asiamoney magazine did not uncover any mob ties to J Bridge.

Former J Bridge chairman Hidetaka Noda was convicted in 2009 of cross-border insider trading in J Bridge shares in 2006, using an account in Singapore.

The former CEO of News Chef, Kenichi Nishimura, was convicted of fraud in 2007. Yukihide Goto, the president of TransDigital, a failed computer systems developer, was convicted for transferring company assets to a creditor before filing for bankruptcy in 2008. J Bridge had sold its stake in TransDigital in 2006.

There is evidence to support the claim made by FACTA that J Bridge had “preyed on a group of companies that were driven into a difficult situation.” It is also unclear how J Bridge/Asia Alliance has been able to fund its investments and remain in business.

In an email to me, Takamori stated that since joining J Bridge in 2007, “the company had never made profit, we had only impairment loss and realized loss.”

The Olympus scandal is about a world-famous Japanese optics maker that lost almost ¥100 billion through zaiteku financial speculation and then tried to cover it up. That may sound simple enough, but the actual means of concealment, laboriously picked apart in a 200-page investigation report commissioned by the embattled company, can be mind-bogglingly complex.

‘The Singapore route,’ for example, involved Olympus making substantial deposits at the Singapore branches of two European banks, as collateral for loans to shell companies and funds registered in the Caymans. Olympus then used these Cayman conduits to buy Altis, News Chef and Humalabo at vastly inflated prices. The excess was then channelled back to help settle the original losses from speculative investment.

Around 1998, the report states that former Japanese banker Akio Nakagawa, who was helping Olympus disguise its losses, introduced Olympus executives Hisashi Mori and Hideo Yamada to Commerzbank International Trust in Singapore. There they met an employee identified in the report only as ‘Chan,’ who provided invaluable help.

When ‘Chan’ left Commerzbank in 2000 and moved to Société Générale, Olympus shifted its time deposits from the German to the French bank in Singapore. In 2004, ‘Chan’ branched out on his own, and managed a Cayman-registered fund, set up in 2005, in which Olympus invested ¥60 billion.

Takamori, who used to work for Orix in Hong Kong and Beijing before joining J Bridge, said this person was Chan Ming Fong. Chan, who was of Taiwanese extraction, had graduated from a Japanese university and worked at Wako Securities before joining Commerzbank, he said.

One of Chan’s colleagues at Wako Securities in Japan was Masuzawa, who later joined Chan at Commerzbank International Trust in Singapore, but left after just one year. Commerzbank head office declined to give any reason for his departure. Masuzawa joined J Bridge in 2004, the same year that Chan left Société Générale.

J Bridge emerged from the merger of a spinning company and a warehousing business in Nihonbashi, the old commercial and financial heart of Tokyo.

Nihonbashi means ‘Japan bridge,’ which Noda and Masuzawa took for the new name of the company after joining in 2004.

J Bridge soon embarked on a blizzard of acquisitions, divestments, and capital raisings.

A 2005 company filing said its objective was to “invest in, manage, rehabilitate and restructure undervalued or underperforming companies and businesses in order to enhance and maximise their values.”

Ethan Penner, a pioneer of mortgage-backed securities who made a fortune for Nomura Securities in the U.S. in the late 1990s, briefly worked for J Bridge.

“I once agreed to join an advisory board for a company called J-Bridge when a former employee of mine, Yuichi Hirayama, who remains a friend to this date, asked me to do this as he was involved in the leadership of J-Bridge and had great plans for the company. His plans ultimately were not realized and he left the company shortly thereafter and my involvement ceased,” Penner, who is now an executive managing director at CNB Richard Ellis, told me. “The entirety of my relationship/involvement amounted to attending a few meetings with the media and a meeting or two with Hirayama-san and others in management at that time."

J Bridge targets varied from operators of bicycle racetracks and multi-storey car parks, to makers of soybean foods and heavy construction plants.

But in several cases J Bridge’s targets weakened considerably after its participation. Kosugi Sangyo, a maker of golfing wear, filed for bankruptcy in 2009, two years after J Bridge sold its stake. Restaurant operator Tasco System was delisted from the Jasdaq and ceased operation after J Bridge sold out in 2007. Osaka property firm Reicof filed for bankruptcy in 2008.

In 2010, J Bridge acquired a Japanese hospital only to sell it for a loss of about ¥1 billion soon afterwards, saying it was withdrawing from the medical and healthcare business.

Another flop was J Bridge’s 2005 takeover of Singapore building materials maker Rotol.

Masuzawa was installed as chairman and executive director of the company 2007, but J Bridge sold most of its stake in Rotol in 2008 to Mulpha International, and reported a ¥430 million loss on the investment.

Mulpha is a Malaysian conglomerate headed by Lee Seng Huang, who also chairs Sun Hung Kai Financial, an investor in J Bridge/Asia Alliance.

The Singapore Exchange delisted Rotol last year; the company had been on its watch list since 2008 after three years of pre-tax losses.

While Rotol was bleeding money, Masuzawa was building an award-winning house in Singapore’s exclusive marina resort, Sentosa Cove, which has since been sold. A much smaller villa on Ocean Drive is now on the market for S$38 million (¥2.3 billion).

Masuzawa is still “based in Singapore, but he keeps coming to Japan,” according to Takamori. Masuzawa did not respond to an interview request.

Until recently, the top investor in J Bridge was Sun Hung Kai & Co., established in Hong Kong in 1969 as the financial arm of Sun Hung Kai Properties, now the world’s biggest property developer by market value.

Allied Group, the Malaysian conglomerate founded by Lee Ming Tee, in 1996 bought a controlling stake in Sun Hung Kai & Co. from the family of one of the Sun Hung Kai founders. Lee Ming Tee, the father of Sun Hung Kai & Co.’s CEO Lee Seng Huang, was sentenced in Hong Kong in 2004 to one year in jail for falsifying accounts.

Akihiro Nagahara, chairman of Sun Hung Kai & Co. consumer finance subsidiary United Asia Finance, has been a J Bridge board member since 2007. Nagahara, who did not respond to written questions, also chairs the Hong Kong Licensed Money Lenders Association.

Asia Alliance Holdings announced on November 29 a “drastic reconstruction of the company’s management” and a shift to investment opportunities in China, especially in “pre-IPO companies”.

Takamori says Asia Alliance’s top shareholder will be a fund of Malaysian-Chinese investors put together by the company’s next president and CEO, Yoshinori Funato, who is set to be confirmed at an extraordinary general meeting in February. He has worked at Nomura Securities, UBS, and Merrill Lynch in Tokyo.

According to the Asia Alliance website, the chairmanship of the company is to be shared between Yang Zilin, chairman of China Bohai Bank and former head of
the Ex-Im Bank of China and the Hong Kong office of Bank of China, and retired Japanese diplomat Akitane Kiuchi, a former private secretary to the late Kakuei Tanaka, who normalized relations with China in 1972.

Alchemy Japan asks questions to Cargill, Carval and ORIX over Love Hotel Scandal

On Alchemy Japan's FB page - they have raised a number of questions to Cargill and Carval regarding the conduct of their senior management around the love hotel scandal with Orix and Kato Pleasure

Peter Vorbich
Joe Koizumi
Takashi Nishiki

We set out the questions in full below.

This story looks like it will continue to give and give


In open court and under oath, Alchemy Japan will be looking to ask Mr Peter Vorbrich, Mr Joe Koizumi and Mr Takashi Nishiki and the rest of Carval Tokyo's staff the following questions (amongst many others) -

1. What was the real reason for the firing of most of Carval Tokyo's front office staff in September 2011?

2. Is the market rumour true that Carval Tokyo senior management and front office

staff were receiving kickbacks from asset managers; especially on sale and purchase of real estate?

3. Is it true that Carval Tokyo refused all direct communications with Alchemy Japan from April 2012 because Alchemy Japan refused to pay kickbacks to Carval Tokyo management?

4. What are the real reasons for the reduction by Kato Pleasure of their original bid of JPY2bn for the Carval Love Hotel portfolio to the eventual price of JPY1.55bn?

5. Why did Carval Tokyo accept a price of JPY1.55bn from Kato Pleasure when there had been previous offers in excess of this final price?

6. Where there any arrangements in place between senior management of Carval Tokyo and Kato Pleasure?

7. Why was Takashi Nishiki removed from his post as Representative of Carval Tokyo in August 2012?

8. Is it the corporate position of Cargill and Carval; as reflected by the then head of Carval Japan, Mr Takashi Nishiki comments to Alchemy Japan, that is it "ridiculous" and "counterproductive to business" to make background checks on contractual counterparties?

9. Does Cargill and Carval Japan have any internal policies or rules regarding compliance with Japanese laws prohibiting contractual relations and monetary transactions with Japanese organised crime entities?

10. Why was ORIX introduced into this transaction as a "broker" some time in July 2012; when Carval Tokyo had already selected Kato Pleasure as their preferred buyer in April 2012?

11. What are the relationships between Mr Joe Koizumi and senior ORIX management? Did these relationships influence the payments made to ORIX for their role in this transaction?

Alchemy Japan FB Page

Panasonic Launches Green City Project in Fujisawa

The Japanese electronics giant heads up a coalition of investors and other companies to erect a planned green district in the city of Fujisawa. The Fujisawa Sustainable Smart Town will consist of a targeted 1,000 homes spread over 19 hectares. The core of the city sits on land once occupied by a factory Panasonic (then Matsushita) used to produce black and white TVs and refrigerators.

Panasonic and PanaHome, a subsidiary concentrating on residential construction, will build the homes as well as equip them with networking and electronic devices. Partners include Sumitomo Mitsui Trust Bank, which is developing “eco” mortgages and financing to allow residents to get solar systems put on their roofs through American-style “solar-as-a-service” contracts. Similarly, Orix will help develop car, scooter and bike sharing networks for the area.

http://www.forbes.com/sites/michaelkanellos/2012/10/09/panasonics-next-product-a-small-town/

Orix other activities -

Cargill and ORIX in Yakuza Love Hotel Scandal

Cargill and ORIX in Yakuza Love Hotel Scandal

日本語訳 - 

NYT記事日本語訳 カーギル, カーバルの「ラブホテル」の売却を巡る対立

There's a youtube account which has some dramatic footage of what went down - 
http://www.youtube.com/user/katotomoyasuorix/videos?view=0

Further videos recording the interaction between Kato and ORIX staff, the Police and operational staff at the hotels -

http://i.youku.com/u/id_UNTMwNTc3NDgw

Not the first time Cargill has had relations with the yakuza.
http://www.usnews.com/usnews/biztech/articles/980413/archive_003691_2.htm

Cargill has had problems with Asian real estate investment in the past as well it seems-
Lawsuit Accuses Cargill of Bribery In Thai Venture
For those without access past the paywall -
www.citizenstrade.org/ctc/wp-content/uploads/2011/05/wsj_cargillbribery_may2004.pdf

 

Some background (Japanese) on the arrest of Kato's employees in 2008 for breaching laws regarding the sex business -   http://tokumei10.blogspot.com.au/2008/04/blog-post_15.html

KAWAGOE, Japan — Several years ago, an investment subsidiary of the agricultural giant Cargill bought a group of so-called love hotels, which typically rent rooms by the hour, including the neon-lit Hotel Shine in this sprawling Tokyo suburb.

 Though many industry analysts say love hotels in Japan are a good cash flow business — catering to young married couples living with family, as well as to philanderers, prostitutes and even penny-pinching tourists — the Cargill subsidiary was disappointed with its results. The unit, CarVal Investors, sold the 10 properties last week for about $20 million, far less than the $60 million it paid for them in 2004 and 2005.

It might have been just another fire sale. After all, many American funds invested in distressed properties at the height of Japan’s economic woes without success.

But CarVal is now under fire from former employees and business partners in part because of the tough tactics of the new owner: an affiliate of a Japanese developer, the Kato Pleasure Group. Immediately after closing the sale on Thursday, the buyer dispatched groups of black-suited men to force out hotel workers and even hotel guests, barricading the entrances with wooden fences.

About 300 hotel workers have been left in the lurch. They are planning a rally outside Cargill’s Tokyo offices this week to protest their treatment. Two executives who managed the hotels under contract during CarVal’s ownership have refused to leave and remain inside Hotel Shine — a standoff that has drawn the attention of the local police.

The most vocal opponent of the sale, however, is CarVal’s former partner, Alchemy, which had a contract to manage the hotels. In registered letters, filed in court, Alchemy contends that CarVal violated business agreements by selling the properties before their contract was up in October 2014.

In submissions to both the local Tokyo and Saitama Metropolitan Police, Alchemy also contends that Kato Pleasure has ties to Japan’s criminal underground and that CarVal ignored repeated warnings — backed up by outside research — not to go through with the sale.

“Our complaint to CarVal is that they ignored credible advice that they were dealing with a suspected organized crime entity,” said Miro Mijatovic, Alchemy’s chief executive.

CarVal says Alchemy’s accusations are baseless. Kato Pleasure also denies that it has criminal links, but it provided little response to questions posed to a spokesman at its Tokyo headquarters and to company representatives at Hotel Shine. The new owner of the hotels is Plus Ten Mind, a company affiliated with Kato Pleasure that shares the same chief executive.

Ann Folkman, a managing director at CarVal, said there were sound reasons to do business in the hotels. “While leisure hotels may sound salacious, they are a legitimate and longstanding industry that caters to the privacy needs of young Japanese adults, who frequently live with their parents or in company-provided housing,” Ms. Folkman wrote in an e-mail. “As with many of the hotels we have invested in across the world, the investment strategy was to run a compliant business, create sufficient scale and operational regularity and then exit to a buyer who could see the value of the business.”

CarVal’s exit came shortly after 3 p.m. on Thursday, when groups of men who said they were affiliated with Kato Pleasure made a coordinated sweep of the hotels, forcing out the staff, emptying hotel rooms of frightened guests, putting up makeshift fences and changing the locks in preparation to install Kato’s own management and workers.

Takashi Hayashi, the chief executive of Urban Resorts, a unit of Alchemy contracted to run the hotels’ daily operations, who has refused to leave Hotel Shine, seemed shaken as he spoke to a reporter through a tall fence on Saturday. He was flanked by two men who he said worked for Kato Pleasure, who refused to speak to a reporter. Around the compound, six workers were putting the finishing touches on barricades at the hotel’s entrances.

“I’m fine,” Mr. Hayashi said. “I have no intention of leaving.”  

Ms. Folkman said CarVal had no involvement in the hotel sweeps. She suggested that Alchemy, which was hired in 2008 to manage the hotels, had encouraged the employees to remain to attract publicity. “We believe Alchemy’s dissatisfaction with the sale is motivating their behavior,” she said, “and we believe many of the claims they are making to The New York Times and others are wholly without merit.” She said that Alchemy was trying to protect its own business and that it had demanded 300 million yen ($3.9 million) to leave the hotels. The demand, she said, was “without any legal basis.” Alchemy, she said, has tried to disrupt the sale because it would like to buy the hotels.

 Mr. Mijatovic countered that Alchemy’s agreement with CarVal had two years remaining and that his company had sought the money to make up for fees lost because of the early termination.

CarVal, which became a wholly owned subsidiary of Cargill in 2006 and now has $9 billion under management, was one of the first American companies to buy portfolios of bad loans and distressed properties after Japan’s real estate collapse in 1990. Since then, investors ranging from Goldman Sachs to smaller vulture funds have paid fire-sale prices for properties.

Love hotels, while tricky to manage, are attractive to investors because of their stable, strong cash flow and high yields. At Hotel Shine, about 3,000 yen, or $38, buys 90 minutes in a bland room dominated by a king-size bed. According to Leisure hotel, a trade publication, the industry has sales of 2 trillion to 3 trillion yen, or $38 billion, a year.

But in recent years, the hotels have attracted the Japanese mafia, big players in the real estate market.

Mr. Mijatovic, Alchemy’s chief executive, said he had passed along a report that Kato had links to organized crime to CarVal and to law enforcement authorities. CarVal said the report, commissioned by Alchemy and prepared by Kroll Advisory Solutions, a global corporate investigations and risk consulting company, lacked credibility.

The report suggests that the Yamaguchi-gumi, Japan’s largest crime syndicate, has made a direct investment of 30 million yen in Kato Pleasure.

Mr. Mijatovic said his lawyers met Monday with the Tokyo Metropolitan Police to discuss information about Kato. Police officials declined to comment on whether they had held such a meeting.

Japan has recently strengthened its laws against doing business with organized crime. The United States Treasury has banned transactions between Americans and Yamaguchi-gumi.

The Kroll report also says Kato, a big company in the love hotel industry, is known for poor working conditions, including overtime work without pay. Takeshi Okubo, a 57-year-old cleaner at a hotel operated by Kato Pleasure in Osaka and a member of a local union, said labor violations were rampant, including unpaid overtime.

Ms. Folkman said the Kroll report and Alchemy had misrepresented Kato Pleasure’s business. CarVal’s legal team found the Kroll memo “vague and filled with innuendo,” she wrote.

She noted that Orix, a major financial services company in Japan, had brokered the sale. CarVal conducted its own research on Kato, she added, and concluded that it was a large, respected hospitality provider in Japan. Kroll declined to comment.

A separate, independent report by Teikoku Databank, a well-known credit research firm, previously cast doubt on Kato Pleasure’s business. The report, dated October 2011, said Kato Pleasure had an account with one small credit union in Osaka but appeared to have none at a major Japanese financial organization. That is generally a rarity for an established business in Japan and can be one sign of mafia ties, according to Hitoshi Suzuki, a lawyer who heads the anti-organized crime committee of the Daiichi Tokyo Bar Association. He cautioned that he was not familiar with the specifics of Kato Pleasure’s operations.

The report said Kato Pleasure had booked an operating loss of 9.2 million yen, or $118,000 in the early months of 2011. As a credit rating, the firm gave Kato Pleasure a failing grade of 39 points out of a possible 100.

An official at Kato Pleasure’s headquarters in Tokyo, who identified himself only as Kawamoto, said on Monday that the company had “absolutely no links” with the Japanese mafia. He called the sale of the hotels “entirely valid” and said it intended to proceed “without a fuss.” When a reporter tried to ask more questions, he hung up. Further calls to the company’s main number went unanswered on Monday evening.

Katsuyuki Suezumi, an official in Osaka at the leisure hotels department of Orix, which brokered the sale, said he was not authorized to comment on the deal. A list of questions sent to Orix headquarters in Tokyo was not answered on Monday. 

http://www.nytimes.com/2012/10/02/business/global/conflict-in-cargill-sale-of-love-hotel-in-japan.html?ref=business