Troubled Tokyo Firm to Take Over Troubled Thai Firm
J Trust Co., Ltd., a Tokyo-based financial services conglomerate, appears to have dropped the fiction that it was an arms-length investor in the troubled Thailand-based Group Lease PCL and is offering to take over outright the hire-purchase firm, once a darling of Thai retail investors.
The Stock Exchange of Thailand and the country’s Securities and Exchange Commission suspended Group Lease’s stock on Oct. 16 and filed a criminal complaint against its chief executive officer, Mitsuji Konoshita, for fraud. Trading in the shares resumed on Oct. 20, then was suspended again and resumed on Oct. 24. At one point the firm was an investor favorite, built on the theory that burgeoning motorcycle sales across Southeast Asia would provide a built-in market that would continue to grow as healthy economies continued to expand. But the shares, which traded at a 52-week high of Bt69.75 (U$2.10) on December 16, 2016, fell to Bt6.55 before recovering to Bt8.75 on Nov. 15.
On oct. 27, the company, which provides financing for motorcycle purchases and agricultural equipment, said its auditors had refused to sign off on its books. Mitsuji Konoshita has been replaced as president by his brother, Tatsuya Konoshita, and has left the country in the face of the charges.
J Trust, which faces questions of its own over the 2014 purchase of 99.996 percent of the shares of Bank Mutiara in Indonesia, currently holds 122.2 million Group Lease shares through a subsidiary, JTrust Asia Pte Ltd as well as US$180 million of the company’s convertible bonds as well as 20 percent of Group Lease Finance Indonesia.
In an announcement in its investor relations section of its website, JTrust said it faces three options over its Group Lease holdings: to retain the current management and shareholdings structure, to seek rescue by other shareholders, and in either case selling off whatever is left.
The third option, according to the company, is to simply take over Group Lease and integrate it with J Trust’s other operations, holding the shares as a J Trust subsidiary.
“The company considers that the option 3 would be the most beneficial for both the company and shareholders of Group Lease because together with J Trust, GL could expand its business further by utilizing as group synergies of retail financing in Southeast Asia,” J Trust said.
That presupposes there will be anything left to take over. Anonymous Equity, a mysterious gadfly shareholder activist organization, released a devastating report in early October that described Group Lease as little more than a Ponzi scheme.
The 63-page report, titled “Is Group Lease a Fraud,” argued that the company has misrepresented itself on a long list of crucial issues including the identity of its key officials and had manipulated its share price via questionable financial dealings.
Thai authorities are said to have taken the case extremely seriously and are believed to be going after not only Group Lease but a cluster of share sales operations in Bangkok that have been characterized as “pump and dump” operators who inflate share prices through fraudulent practices and then dump them on retail investors, who subsequently are left with worthless holdings.
J Trust “is committed to making an utmost effort with a view to reaching a conclusion before the end of November, based on engaging in close consultation with the relevant authorities as well as complying with applicable law and by-laws, and the rules of the Stock Exchange of Thailand and the Kingdom of Thailand,” the Tokyo firm said. “In any situation, the company is taking into account the interests of stakeholders to maximize its value while mitigating impacts on business performance by expertise and experience.”
J Trust’s operations in Indonesia have come under scrutiny over its 2014 takeover of what was then Bank Mutiara, which was subsequently renamed PT Bank JTrust Indonesia TBK. Although the Japan group had publicly said it agreed to pay US$368 million for the bank, in fact they paid only 6.8 percent of that amount. The rest was to be steered through a Bank of Indonesia shariah loan that was written off later
J Trust Group is headed by Nobuyoshi Fujisawa, who, among other things, had been an executive with various subsidiaries of Live door, a Japanese Internet service provider that went belly-up spectacularly in 2006 amid charges of market manipulation, securities fraud and false accounting procedures. Major shareholders of J Trust include Taiyo Pacific Funds, Invesco, the California Public Employees Retirement System (CalPERS), Saikyo Bank and WL Ross CG Partners. The W L Ross is Wilbur Ross, the secretary of commerce in the Trump administration.
At one point, as Asia Sentinel attempted to get an explanation of the discrepancy between the announced sale price and the actual one, a J Trust spokesperson replied by email that: “Your inquiries in your said emails are pertaining to matters that may relate to the pending disputes in which J Trust has been involved; therefore, J Trust has no intention to answer your inquiries regarding any details.”
That was followed up on May 26 with a letter from J Trust’s Hong Kong-based lawyers Linklaters threatening libel action. None has ever been forthcoming, however.