Newbridge to buy US$76m in Cosmos Bank loan notes

US-based Newbridge Capital reportedly plans to purchase NT$2.5 billion (US$76 million) of subordinated bonds from local lender Cosmos Bank Taiwan (萬泰銀行), sparking speculation that the finance company will become one of the bank's major shareholders, strengthening its foothold in Asia.

In January last year, Newbridge Capital bought NT$27 billion in securities, including NT$20 billion of stock and NT$7 billion in convertible bonds from Taishin Financial Holdings Co (台新金控) in a private placement.

The purchase made Newbridge the single largest institutional investor in Taishin, with an 18 percent stake.

Cosmos Bank, the nation's largest cash-advance card issuer, applied to the Financial Supervisory Commission (FSC) last November to issue NT$7 billion in subordinated bonds to improve its asset quality.

Its biggest shareholder, GE Consumer Finance, the consumer lending unit of General Electric Co, will purchase NT$4.5 billion of the products, with the remaining to be absorbed by Newbridge Capital, a report in the Chinese-language Economic Daily News said yesterday, without citing any source.

As of press time yesterday, calls to Cosmos spokesman Shih Kung-liang (施坤良) for comment were not answered.

In January last year, Cosmos celebrated the formation of a partnership with GE Consumer Finance, which announced it would acquire a 24.9 percent stake in Cosmos for over NT$9 billion.

The deal is to be done in two stages, with GE Consumer Finance first buying a 10 percent stake in Cosmos through a share subscription of 197 million common shares for US$86 million in the second quarter.

GE Consumer Finance would then acquire the remaining 14.9 percent stake through a convertible bond structure within the next four years, the bank said.

Officials at the FSC's Banking Bureau revealed that GE Consumer Finance agreed to the previous deal to help Cosmos improve its financial structure, which explains its move to buy the subordinated bonds issued by Cosmos, the report said.

As of last November, Cosmos had reported losses of NT$6.97 billion as it booked huge amounts of provisioning costs to cover the mounting bad consumer loans. It generated NT$920 million, or NT$0.52 per share, in pre-tax income in 2005.