Cerberus eying Chung Shing

International investment firm Cerberus Asia Ltd may make a play for debt-ridden Chung Shing Bank (中興銀行), company officials said yesterday.

"[Cerberus] is conducting a due diligence check on Chung Shing's portfolio before coming up with a final decision," Jaideep Krishna, managing director for Cerberus, said yesterday.

Krishna was in Taipei yesterday, accompanying former US vice president Dan Quayle on his visit to Taiwan.

Quayle, a senior advisor to Cerberus, met with Minister of Finance Lee Yung-san (李庸三) yesterday. Local media speculated that the two spoke about the possible bank deal.

But Quayle refused to comment on his meeting with Lee, saying it was just a "private" conversation.

Cerberus in late March successfully bid for NT$13 billion in bad loans from First Commercial Bank (一銀).

In contemplating the banking deal, Cerberus' major concern will be how much money the government will put up for Chung Shing's bad loans, Krishna said.

The government has a financial restructuring fund, similar to the Resolution Trust Corp in the US, but the bailout fund isn't well capitalized.

Krishna said Cerberus could help write off Chung Shing's non-performing collateral and keep the commercial bank running if it takes over the ailing bank.

In addition, the takeover would be a part of the company's plan to set up a financial holding company in Taiwan, he said.

Lee has previously said that Chung Shing is currently sitting on roughly NT$40 billion in bad loans. Central bank statistics show that the bank's bad-loan ratio rose to 57.24 percent at the end of last year.

Huang Da-ye (黃達業), a professor of finance at National Taiwan University, said yesterday that he believes the bank may be sitting on more than NT$40 billion in bad loans, noting that the nation's NPL accounting standards are looser than the international standards.

"By international standards, the bank's NPL ratio would rise to somewhere between 60 to 70 percent, which would greatly weaken the government's bargaining power with Cerberus," Huang said.

Huang said the government may have to offer as much as NT$80 billion toward Chung Shing's bad debt in order to convince Cerberus to take over the bank.

But the government's restructuring fund has just NT$60 billion on hand -- leaving a NT$20 million shortfall and no funds leftover for other troubled banks.

Still, Huang said the government should sell the bank as soon as possible, saying leaving the matter to later would create more losses.

Krishna refused to comment yesterday on the funding issue.

He would only say that Cerberus is having smooth communications with officials at the Central Deposit Insurance Corp (CDIC) and other related government agencies.

Chung Shing is currently under the CDIC's management. CDIC took control of the ailing bank two years ago at the finance ministry's behest.