Morgan Stanley and Union Bank of Taiwan (
"It'll be a win-win situation," Morgan Stanley's managing director Matthew Ginsburg said yesterday at the signing ceremony to exchange letters of intent with Union Bank.
As part of the initial agreement, Morgan Stanley will buy NT$4.7 billion in non-performing loans from the Taiwanese bank.
Ginsburg said the venture will succeed because of the partnership's flexibility.
"Morgan Stanley will be allowed to buy NPLs from other lenders in addition to Union Bank," added David Bednar, executive director of Morgan Stanley.
According to the US investment bank, Union Bank, a veteran of Taiwan's real estate industry, will be key in helping the company grab a share of the nation's emerging opportunities in non-performing loan collateral. In addition, Union Bank is keen to share in Morgan Stanley's experience and expertise in managing impaired assets.
Bednar also expressed keen interest in Taiwan's NPL market, saying prices for non-performing collateral here are the highest among all other Asian countries.
He said that the recovery ratio in Japan is about 5 percent to 15 percent, 15 percent to 30 percent in South Korea and 10 percent to 30 percent in Thailand.
The price Morgan Stanley offered yesterday to purchase Union Bank's NT$4.7 billion in bad loans was 35 percent of the face value on the secured loan assets, with a "contingent payment that could take the price to exceed 60 percent of the outstanding principal," the bank's statement said yesterday.
Expressing satisfaction with the transaction price, Union Bank president Lee Shiang-chang (李憲章) said the bank's NPL ratio will be reduced from the current 5.8 percent to 5.1 percent after the sale.
Lee claimed that the bank's underlying non-performing collateral sold to Morgan Stanley is of good quality, which includes 900 borrowers scattered across Taiwan.
In addition, Union Bank plans to write off another NT$1.8 billion in bad loans, Lee said, aiming to further reduce the bank's NPL ratio to 4 percent by year's end.
The joint venture -- in which Morgan Stanley is expected hold a 51 percent stake -- is pending approval from the Ministry of Finance, Lee said.
Union Bank is an affiliate of this paper's parent company, the Liberty Times Group.
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