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Wednesday February 09, 08:41
Goldman makes largest foreign investment in Japan's financial services
(by Sh. Nakata)

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Goldman makes largest foreign investment in Japan's financial services Goldman Sachs’ investment in Sumitomo Mitsui Financial Group, the biggest foreign investment in a Japanese financial services company, amounting to Y150.3bn can be exchanged for a 7% stake in Japan’s third biggest bank on Wednesday.

In February 2003 Goldman acquired SMFG preferred stock to increase the strength of SMFG’s capital base on condition that it can be converted into common shares at the end of the “lock-up” period.

By the term of the deal a third of the common shares can be sold by Goldman in the year starting Tuesday, and another third in the following year. According to SMFG Goldman has the right to convert the shares at Y322, 300 getting about 466,336 common shares.

This deal could bring record returns on Goldman Sachs’ investment as SMFG’s shares gained more than 80% since February 2003.

Moreover, Goldman has already collected Y7.7bn in annual cash dividends on securities and its income will grow by the end of the financial year on March 31.

Also Goldman is insured against losses on loans to investment-grade clients with $1 billion provided by SMFG.

The return on Goldman investment in Sumitomo Mitsui Financial Group might be bigger than Ripplewood Holdings’ investment in Shinsei Bank which was bought for about $1billion in 2000 and made $2.4 billion from selling a third of its holdings last year.

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