Cerberus on top in bank asset auction

First Commercial Bank named Cerberus Asia Capital Management LLC, a unit of Cerberus Partners LP, as the winner of its first auction of bad loans, according to sale manager, PricewaterhouseCoopers LLP.

There were 11 potential investors, though fewer had submitted bids by yesterday's 4pm deadline, said Jeffrey Hsia (夏中興), a managing director at consultancy PriceWaterhouseCoopers.

Hsia said First Commercial will sell the non-performing commercial loans at a discount, declining to provide more details.

The sale of NT$13 billion (US$372 million) of bad loans, most of which are real estate-related, is critical to the bank's plans to clean NT$62 billion of bad loans from its books by June.

The nation's first such auction was also keenly watched by other lenders grappling with more than NT$1.64 trillion (US$47 billion) of bad loans.

Huang Shiu-nan (黃秀男), executive vice president of First Commercial Bank, earlier said the bank would have asked for new bids if yesterday's bids didn't match its reserve price expectations. Huang declined to reveal the reserve price.

"If they sell at a good price, it will affect all the other banks' plans," said Hsieh Chao-nan (謝昭男), executive vice president of Chang Hwa Commercial Bank (彰化銀行), which plans to write off at least NT$30 billion of loans this year. "We won't necessarily follow First Commercial's example, though we'll use it as a reference."

First Commercial shares rose 4 percent, their biggest one-day-gain in three weeks, to close at NT$20.70 yesterday.

Lehman Brothers Holdings Inc and Goldman Sachs Group Inc were among foreign investors that have earlier expressed interest in buying Taiwan loans, though there have been few successful transactions.

Chinatrust Commercial Bank (中國信託銀行), the nation's largest credit card issuer, and Goldman Sachs failed in an attempt last year to start an asset manager to buy bad loans from other banks, Chinatrust said, citing rivals' reluctance to sell bad loans at realistic prices.

"A successful auction would be a benchmark for would-be sellers of non-performing assets and asset management companies in Taiwan," said Krista Yue, a bank analyst at Goldman Sachs in Hong Kong. "It's not just the price; we want to see a meaningful size sold. I still think there is (an expectation) gap between the buyers and the sellers at this point."

A successful sale may also boost shares in Taiwan banks, where at least 11 percent of loans are bad or threatening to go overdue, according to the central bank. Investors are concerned the real level may be much higher, and want to see banks cleaning up their balance sheets.

If the sale proved unsuccessful, "we would certainly be disappointed," said Darwin Chang, who helps manage NT$570 million in Taiwan equities at Reliance Securities Investment Trust Co.