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No. 356, May 1999

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American Companies in Japan


FINANCIAL SERVICES

The Ministry of Justice has licensed an affiliate of GMAC COMMERCIAL MORTGAGE CORP. and three other firms as the first companies authorized to act as loan servicers. Until the law changed in February, only lawyers could perform such functions as collecting payments on property-backed loans for financial institutions. To expedite the disposal of the huge volume of bad loans on the books of banks and other financial institutions, however, the government decided to allow private businesses into the loan-collection field. These companies have the freedom to do such things as buy the real estate or other collateral securing a loan and sell it to a third party. For GMACCM, loan servicing is a natural extension of its business in the United States, where it is the largest servicer of commercial mortgages, and its operations in Japan, where it is purchasing property-back nonperforming loans (see Japan-U.S. Business Report No. 352, January 1999, p. 16).

Among the other companies lining up to be licensed by MOJ as loan servicers is a subsidiary recently formed by CERBERUS PARTNERS, L.P., a New York City hedge fund that invests mainly in depressed properties and bankrupt companies in the hope of profiting when prices rebound. The new unit will handle collections on real estate- backed bad loans purchased by Cerberus as well as by other foreign investors. Within a year, it expects to have 50 people on staff in Tokyo and another 30 in Osaka.

With more consumer finance companies deciding to outsource various operations, including affiliates of GE CAPITAL CORP. and ASSOCIATES FIRST CAPITAL CORP. (see Japan-U.S. Business Report No. 354, March 1999, pp. 19-20), JACCS CO., LTD. sees a good business opportunity. The major Japanese consumer credit company has enlisted IBM JAPAN LTD. and a BANK OF TOKYO-MITSUBISHI, LTD. affiliate as minority partners (5 percent each) in a firm that will service consumer loans and other personal finance activities for small and regional consumer finance companies that cannot afford to invest in the needed computer systems. JACCS INFORMATION SYSTEM SERVICE CO., LTD. will spend as much as $583.3 million on hardware and software over the next two years to handle outsourced back-office functions. The venture expects its system to be fully operational by May 2001.

As part of its strategy of becoming the top lessor of semiconductor production, assembly and test equipment in Japan as well as in the United States, COMDISCO, INC. invested nearly $12.3 million in its COMITO EQUIPMENT MANAGEMENT SERVICES venture with ITOCHU CORP. The capital injection raised the Rosemount, Illinois company's stake in the joint venture to 90 percent from the 60 percent it funded when Comito was formed in October 1997. To expand its business, Comito will put more emphasis on buying and leasing back to semiconductor makers already installed equipment. Now, most of its revenues comes from leasing new equipment. Next spring, the company plans to start selling off-lease, reconditioned equipment.

An exchange rate of ¥120=$1.00 was used in this report.aaaaaa

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