Friday June 16, 2000
By Miki Shimogori
TOKYO, June 16 (Reuters) - U.S. private investment group Ripplewood Holdings, known for its headline-grabbing takeover
of a failed Japanese bank, looks interested in another acquisition -- this time failed hotel operator Dai-Ichi
Hotel Ltd .
``Various institutions, including Ripplewood, have offered to help us rebuild the business,'' an official in charge
of court-led administration work for Dai-Ichi told Reuters on Friday.
Dai-Ichi, burdened with total debt of 115 billion yen ($1.08 billion), filed for a court-led business rehabilitation
process late last month, becoming Japan's sixth listed firm this year to go under.
The official declined to comment on the chances of Ripplewood winning a bid for the hotel, saying a decision was
up to the court, but he said he hoped to see the rehabilitation process start in a month or two.
Ripplewood made no comment, but it has voiced its intention of making buyouts of Japanese hotels jointly with American
Hotel company Marriott International Inc (NYSE:MAR - news).
In March, the two unveiled a plan to set up a joint venture to acquire hotels in Japan with a fund of 400 billion
yen.
The venture, in which Ripplewood will take an 80.1 percent stake, aims to acquire hotels, renovate them and convert
them to the Marriott International brand. It will also consider a public flotation of a portfolio of hotels.
Other candidates looking at Dai-Ichi include Japanese railway company Hankyu Corp , which has expressed a willingness
to give financial backing to the bankrupt hotelier.
TROUBLED FIRMS DRAW FOREIGN INTEREST
The failure of Dai-Ichi Hotel was the latest sign of tough times for indebted firms unable to obtain further financial
aid from banks becoming increasingly edgy of credit risk.
The hotelier's strategy, forged during Japan's bubble era of the late 1980s, to build or renovate some flagship
hotels in Tokyo backfired as construction costs soared in the bubble building spree only to be followed by a prolonged
slump in revenues after the bubble burst in 1990.
Analysts said a growing number of corporate bankruptcies, which rose for a seventh straight month in May, offered
opportunities for foreigners to acquire such firms.
In the latest signal of foreign interest, U.S. buyout specialist Cerberus last month said it would take a stake
in failed Nagasakiya Co Ltd , which operates a nationwide chain of 95 supermarkets, to help it rebuild its business.
The New York-based Ripplewood boosted its profile this year by succeeding in its bid for failed Long-Term Credit
Bank of Japan (LTCB), becoming the first foreign firm to buy a bank.
``With the Dai-Ichi Hotel chain having hotels in prime location across the nation, it makes sense that it is a
target for foreign investment,'' said Takakazu Nakamori, a senior researcher at credit research firm Teikoku Databank.
``Although steering the firm back to health would not be easy amid heightened competition in the industry and with
a falling number of corporate clients here,'' he said.
POTENTIAL CONTROVERSY
Selection of a winner for Dai-Ichi is expected later rather than sooner because assessing the group's asset value
would take time, he said citing news on Friday that a real estate unit of Dai-Ichi had filed for liquidation with
62 billion yen in debt.
However, Ripplewood's bid could trigger controversy because its Japanese bank purchase, reborn this month as Shinsei
bank, is one of the hotel group's main creditors.
If Ripplewood acquires the hotelier, the move could be seen by some as an investor allowing a troubled firm go
under via its bank in order to pick it up later on the cheap, Nakamori said. ``Such a deal is legally feasible,
but should draw public criticism,'' he said.