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Cross-holdings begin to unwind

CSFB hopes "to get the orthodox, corporate listed exchangeable bond structure working in Japan", but certain obstacles are making this and other sophisticated equity capital markets techniques difficult to establish.

Japan's corporate cross-shareholdings are being unwound at an ever-increasing pace as the historical ties have come to feel more like handcuffs for modern management. But while in Germany - the other major economy where corporate groupings built in the aftermath of the Second World War are breaking up - the exchangeable bond has been used extremely effectively a number of times, it is yet to become a commonly used instrument in Japan. "We are extremely keen to get the orthodox, corporate listed exchangeable bond structure working in Japan," says Michael Remington, a managing director in Credit Suisse First Boston's investment banking division.


But there are obstacles that are making this and other sophisticated equity capital markets techniques difficult to establish.


Overwhelmingly the domestic banks are unwinding by simply selling down their shareholdings into the market using the block trade.


In western markets, the risk of block trades is that a sudden huge new supply of stock will depress the share price, punishing the seller if it retains any position. Although in Japan, bankers attempt to pre-place shares, rather than dump them on the open market, it's still a crude approach.




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