GE Capital Corp. said it would buy an $11 billion loan portfolio from troubled Long-Term Credit Bank of Japan Ltd.
The nonbank lender would acquire all the U.S. commercial loan assets of Tokyo-based Long-Term Credit, which was declared insolvent last year.
Terms of the deal were not disclosed, but it would increase Fairfield, Conn.-based GE Capital's $300 billion of assets by about 3%. The U.S. loans are considered among the most valuable of Long-Term Credit Bank's holdings.
GE Capital won the transaction in a competitive bid, the two companies said. The deal, announced over the weekend, is expected to close by December.
A banker familiar with Long-Term Credit Bank said the portfolio includes a diverse range of credit risk and carries a below-investment-grade rating of BB.
The portfolio had been set up for a securitization to back a collateralized loan obligation, the banker said.
"My understanding was that this was a CLO that they put together," the banker said. "When they went insolvent, they broke it up and took out the liabilities. They've been trying to sell it for some time."
Until 1998, $162 billion-asset Long-Term Credit Bank was an active player in the U.S. syndicated loan market. It received credit for participation in $102 billion in deals in 1997, including such investment- grade names as Chrysler Financial Co., International Business Machines Corp., Norfolk Southern Corp., and WorldCom Inc.
The bank also was active in leveraged loans, for companies including Allied Waste Industries Inc., Chancellor Broadcasting, and Del Monte Foods Co.
The Japanese government nationalized Long-Term Credit Bank last year, after the bank became insolvent. It had $22 billion more in liabilities than assets. The government hired Goldman, Sachs & Co. to act as an adviser to the bank.
The deal is another aggressive move by GE Capital since Dennis D. Dammerman succeeded Gary Wendt as CEO of GE Capital Services last December. Since Mr. Dammerman's arrival, GE Capital has reported a 20% increase in assets, to $300 billion.
However, Robert Young, an analyst with Moody's Investors Service, said GE Capital was getting more aggressive even before Mr. Dammerman came on board.
"I don't know if the character of the company has changed," Mr. Young said. "We've seen their interest in Japan developing for the last two years."
This is GE Capital's fifth deal to buy assets from distressed Japanese companies. In January GE Capital announced it would buy a $6.44 billion portfolio from Japan Leasing, a Long-Term Credit Bank affiliate.
"The way they summed it up to us was by putting a map of Japan on the wall and saying they wanted 'to overwhelm Japan,'" Mr. Young said.
He added that GE Capital had some knowledge of the Japanese market, and "where they don't have it, they're adding it."