Rolling up the regional bank-affiliated guarantors (2018–)

The business of buying a bundle of contracts

Mie Sogo Credit had stopped accepting new guarantees in May 2021, three and a half years before it was bought. A deal paying $12.5M (¥2bn) for a company that had ceased selling makes sense only because what was being bought was not future sales capability. What Zenkoku Hosho took over was the bundle of guarantee contracts already signed, and the balance they generate. Prospecting for partner lenders one by one and raising utilisation rates has the same objective as this transaction; only the use of time differs. In a business certain to contract, the judgement appears to have been that taking over balance someone else has built is the faster route.

Speed has its price, though. The companies a seller lets go are also the companies in which the seller sees little upside, and they include books like Mie Sogo Credit’s that are running down. Operating profit for the year to March 2024 fell below the prior year, in the same period as the acquisitions were stacking up. With Shikoku Sogo Credit, the 2022 capital and business alliance has not progressed to a full acquisition, and Nakanihon Sogo Credit remains at 23.0%. The regional guarantee network is not a thing that can simply be bought outright by putting up money; it is an area where the structure of each deal has to bend to the counterparty’s shareholder register and local circumstances.