UPDATE:Tokyo Star Bank CEO Likely To Be Asked To Step Down -Sources

The foreign chief executive of embattled Tokyo Star Bank is likely to be asked to step down, people familiar with the discussions said on Monday.

Robert M. Berardy, a rare foreign CEO at the helm of Japanese bank, will likely be asked to leave after creditors gain control of the bank from its current owner - private equity fund Advantage Partners LLC - according to the people. Masaru Irie, one of directors of the bank and its chief administrative officer, will likely be promoted to the bank's president, the people said.

"I don't have any plans to resign as CEO," said Mr. Berardy, in an interview with the WSJ, "If there is a change in ownership [of Tokyo Star Bank] then I would imagine that I would have discussions with the new ownership. At this point there has been no discussion in that regard about me stepping down. If [the new owners] decide to get rid of me, that would be at their discretion. As far as resigning that would be my decision and I have no plans."

The Tokyo bank has been in the red for 21 months, causing an Advantage Partners' special purpose vehicle to miss a key deadline for loan payments. Tokyo Star Bank is now set to fall into hands of its creditors, including US buyout fund Lone Star, Shinsei Bank Ltd. (8303.TO), Credit Agricole and Aozora Bank Ltd. (8304.TO).

Since then, the Japanese private equity fund had been in talks with creditors about giving up board seats at Tokyo Star Bank and control over the eventual sale of the lender. All of 5 directors from Advantage Partners are expected to leave, the people said.

Tokyo Star Bank has been struggling with losses caused by putting aside more reserves for bad loans. Advantage Partners agreed to buy a controlling stake in Tokyo Star Bank from U.S. buyout fund Lone Star in 2007, and launched a tender offer for the remaining shares of the bank in 2008. The creditors had lent Advantage Partners the Y170 billion needed to buy the remaining shares of Tokyo Star Bank, agreeing to use dividends received from Tokyo Star to make interest and principal payments, the people said.

Prior to that, the bank had been in Lone Star's possession for seven years. After Tokyo Sowa Bank went bankrupt in 1999, Lone Star acquired and began to operate the failed bank in 2001. Lone Star created Tokyo Star from the ashes of Tokyo Sowa Bank, which it bought in 2001 for about Y40.3 billion.

Advantage Partners last week agreed to give all of Tokyo Star Bank's outstanding shares to its creditors, with loans being transferred into a new special-purpose vehicle created by the creditors, according to the people.

-By Atsuko Fukase, Dow Jones Newswires; [phone]; [e-mail]