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Bloomberg
Mitsubishi UFJ Financial Group Inc. plans to sell about 86 billion yen ($608 million) worth of Marelli Holdings Co. loans to Deutsche Bank AG, as the auto-parts supplier undergoes a court-led rehabilitation.
The Japanese bank has already written off most of the amount, and is seeking to recover income by selling the debt. The bank is seeking to complete the transfer in October, they added.
Deutsche Bank’s bet comes after another distressed debt deal gave the lender a huge windfall profit, estimated to have been as much as $1 billion, last year. That turned the unit overseeing the transaction — the credit trading business — into a key performance driver that helped the German lender achieve the highest profit in a decade. The bank has since said the unit is unlikely to repeat that result this year.
It’s not clear how much Deutsche Bank will pay to acquire the Marelli debt held by MUFG, although it will be at a significant discount, the people said. The deal won’t impact Marelli because it is well advanced in the restructuring process.
Sumitomo Mitsui Financial Group Inc. is considering also selling its Marelli loan portfolio of about 173 billion yen.
The Tokyo District Court approved Marelli’s restructuring plan on August 10.
As part of the turnaround plan, Marelli saw the cancellation of about 450 billion yen in debt. As of March, Marelli’s total debt stood at around 600 billion yen, from 1.13 trillion yen before the rehabilitation process.
MUFG’s loans to Marelli were reduced to about 86 billion yen due to partial debt forgiveness, from about 147.6 billion yen.
Marelli, owned by KKR & Co., had initially sought an Alternative Dispute Resolution process in Japan that lets a company under financial strain continue to operate while renegotiating its debt with creditors. The current court-supervised procedure is effectively an extension of the ADR process that simplifies the steps needed to reach resolution.
KKR was selected as a sponsor for Marelli, a key supplier for Nissan Motor Co. and Stellantis NV, which would essentially keep the private equity firm as a key stakeholder.