The capital restructuring that repaid the public funds (2012)

A deadline that dictated the shape of the answer

The deadline of October 2012 determined the shape of this decision. If ¥155.3 billion could not be repaid, the government’s preferred shares would convert into common stock and the state would join the shareholder register as an ordinary owner. What Aozora chose was to cut capital from ¥420 billion to ¥100 billion to create the resources, and to repay in cash — a ¥22.7 billion buy-back plus a special preferred dividend of ¥20.5 billion a year. A capital reduction is not a policy that sounds good, but at the time no other route appears to have been visible that avoided dilution and state involvement at once.

That said, finishing in three years was not achieved by its own efforts alone. The share price had recovered, and Cerberus, the largest shareholder, stepped off its holding for about ¥150 billion — which made it possible to complete the repayment and tidy the capital structure in the same movement. Set that beside Shinsei Bank, whose preferred shares had already been converted to common stock and which therefore could not negotiate a staged repayment, and the difference in outcome looks less like a difference in management effort than a difference in how the public funds were injected in the first place: as preferred stock, or as common.