Ripplewood Holdings LLP

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Ripplewood Holdings LLP Japan Trip
2002 In-class Presentation By Aswin and Chris
(Kozo)
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• Table of Contents
• General Overview in Japanese Economy (A little)
• Case Study Ripplewood Holdings LLP
• 1.) Shinsei Bank
• 2.) Niles Parts. (Nissans vendor)
• 3.) Seagaia (Hotel Resort)
• 4.) Nippon Columbia
• Key drivers for success of Ripplewood
• Major challenges of Ripplewood

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What is Ripplewood?

• US based Private Equity Firm
• 4 funds(3B)
• Ripplewood Interim Partners, L.P.,
• Ripplewood Partners, L.P.,
• Ripplewood Japan, Inc.,
• New LTCB Partners C.V.
• Investment Focus
• Education publishing and training,
• Selected technology market segments
• Automotive retail, specialty chemicals
• Consumer products food manufacturing
• Industrial products
• Timothy C. Collins (Founder, 1995)
• Senior MD and CEO of Ripplewood Holdings L.L.C.

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General Overview in Japan (A little)

• Corporate Restructuring
• - Write off the bad debt (popular)
• - Huge Distressed Debt Business Opportunities
  for Investment Bankers
• - MA unpopular, LBO really unpopular
• Private Equity Deal
• - Financial Deal or Turn-around deal?
• Private Equity Players entering into Japan
• - Current Player Ripplewood, Advantage
  Partners,
• Schroder Ventures etc.
• - Carlye Group just started

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• Former Long Term Credit Bank (LTCB)
• Fully integrated Bank
• 1. Commercial Banking
• 2. Retail banking
• 3. Investment Banking
• All-Star Management team
• 1. CEO Masamoto Yashiro (72) - President of
  Citibank Japan
• 2. Senior MD David M. Fite (38) Group
  Executive of Austrian Bank
• 3. Executive Director 5 people from outside
  (50, 36, 43, 53, 54)
• Recent Performance (2001)
• 1. Highest Self-Owned Capital Ratio among
  Japanese large banks
• 2. 2nd highest ROE among Japanese large banks
• 3. 2nd highest ratio of bad debt reserve account
  among Japanese large bank

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History Shinsei Bank

• 1998.10 - Long Term Credit Bank collapsed with
  nearly 40
• billion in bad loans and was nationalized.
• Over 45 of LTCBs loans were in real estate,
• construction and nonbank finance industries.
• 1999.05 Tom Collins and Yashiro entered into
  negotiations
• with LTCB
• 2000.03.01 LTCB was purchased by the New LTCB
  Partners.
• Partners pay 9.1 million to the
  government and
• agreed to inject 1.1 billion of fresh equity.
  Govt
• also purchased inappropriate loans that worth
  
• 44 trillion yen (30 billion) and handed over
• 71 billion worth of bank assets to Partners.
• 2000.03.03 Masamoto Yashiro, 71, Ex-President
  of
• Citibank Japan assumed the role of
• Chairman, President, and CEO.

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SEAGAIA Resort

• 153 ha
• Bubble Resort,
• Owned by Local Government etc.
• Star Manager
• Michael F. Glennie
• - Former CEO of Boca Raton
• Resort and Club

753 Rooms
296 Rooms
27 hole - Phoenix Country Club 18 hole - Tom
Watson Golf Course 36 hole - Phoenix Kogen
Country Club 18 hole - Kitago Phoenix Country
Club
Tokyo
SEAGAIA Resort
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History - Seagaia

• 1994.10 Full Open by 13 Equity holders
  including Miyazaki
• Prefecture and Miyazaki City
• Total Cost 1.5 billion
• 1997 1st half Peak 112,500 tourists
• 2000 1st half 49,200, 56 down from its peak
• 2001.02.19 Declared the Corporate
  Rehabilitation Law
• Total Debt 2.5 billion
• 2001.05.10 Master agreement with Ripplewood
• 120 million 80 million additional
  investment
• 2001.09.28 - Michael F. Glennie,
• President and Chief Executive Officer
• 2001.12.10 Operation Management agreement with
• Starwood ResortHotels Worldwide

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Niles Parts

• Former Nissans Vendor
• Business Focus (Sales 2001 300M)
• switches, sensors, actuators and control units
• Star Board Member from outside
• Richard Donery
• Former Vice President of GM
• - Former President of GM Europe

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History Niles

• 1949.03 - Established by Taketoshi Suzuki
• 2001.04 - Nissan Motor sold 40 of all shares
  issued in Niles Parts to Ripplewood

Their Office and Plant Location
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Nippon Columbia

• Former Hitachi Group
• Business Focus
• Music Entertainment, Media Equipment
• Star Board Member from outside
• CEO Strauss Zelnick(44)
• Former CEO of Fox
• - Former CEO of BMG Entertainment
• Katsumi Matsumura
• - Former Director of BMG Japan Entertainment

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History Nippon Columbia

• 1910 - Originated in "Nippon Chikuonki Shokai"
  (Japan Recorders Corporation), established by
  Frederick Whitney Horn
• 1912 - Merged with Japan-U.S. Recorders
  Manufacturing
• 1927 - Entered into a capital tie-up with
  "Columbia, a world-class major record company
• 1946 - Renamed to Nippon Columbia
• 2001 - Signed agreement with Ripplewoods and
  Hitachis financial revitalization plans and
  capital infusion
• Present- Ripplewood and Hitachi own 41.7 and
  27.5 of the Nippon Columbia respectively

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Ripplewoods Japan strategy Observed -

• Opportunistically invest in different industries
  to restructure the companies with the objective
  of turning the company around.
• Combine Western management style with local
  Japanese expertise in managing the restructured
  companies.
• Leverage human networks, personal connection
  with Industry partners.
• Invest with longer time horizon that fits with
  the Japanese business culture.
• Form alliance with Mitsubishi Corporation to
  gain local market intelligence and business
  connections.

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Major Possible challenges of Ripplewood

• Hire managerial talent Industrial Partners
• Infuse western management style into their
  portfolio companies and change the Japanese
  companies with a strong culture that is embedded
  in the firm
• Exit Strategy Who will buy? -
• Bankruptcy laws are less well established.
• Regulation and tax issues (consolidated tax).

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Please come up with QUESTIONS for Ripplewood?
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New Artists of Nippon Columbia
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SEAGAIA Resort 153 ha
Ocean Dome - the world's largest all-weather
indoor water park, as certified by the Guinness
Book of Records.
753 Rooms
Convention Center
296 Rooms
The Luxze Hitotsuba Cottage Himuka
Hotel Kitago Phoenix
27 hole - Phoenix Country Club 18 hole - Tom
Watson Golf Course 36 hole - Phoenix Kogen
Country Club 18 hole - Kitago Phoenix Country
Club
Tokyo
SEAGAIA Resort