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Wednesday, November 15, 2000

Daiei stock falls 17%
amid bankruptcy fears

Bloomberg News

TOKYO -- Daiei Inc. shares tumbled 17 percent to a record low, on what an analyst said is concern the debt-laden supermarket and department store operator may go bankrupt.

Japan's second-biggest general merchandiser fell 29 yen to 141. It has lost half its market value since the beginning of October, on declines sparked by the resignation of President Tadasu Toba, who was hired from outside the company to help it trim 2.8 trillion yen ($26 billion) in debt.

"(Severe) situations for all retailers, and Daiei's debt and its management" are raising investor fears of a possible bankruptcy, said Toshiko Binder, a retail analyst at HSBC Securities Inc., who has a "sell" rating on the stock.

Daiei has no plan to seek court protection, said spokesman Yoshihiro Yamaguchi.

"We're trying to improve finances to regain trust in the stock market."

Daiei accumulated debt the 1980s and early 1990s, as it expanded into everything from gas stations and Wendy's Hamburger restaurants to the Fukuoka Daiei Hawks baseball team.

(In Hawaii, the company's Daiei USA unit owns four Oahu department stores. Last year as it worked to pare down its debt, the company sold Ala Moana Center to the mall's manager, General Growth Properties Inc., for about $810 million.)

The company moved to counter investor concern today, saying it would repay 12.6 billion yen in bonds early, and set aside 23.6 billion yen in cash to secure other bonds.

The move prompted Moody's Investors Service to cut its rating of Daiei's unsecured debt, affecting about 70 billion yen in bonds. Moody's cut Daiei's unsecured debt rating one notch to "B2," five notches below investment grade, as those bonds would now be subordinated to more secured debt.

Moody's said it will continue its review of Daiei that began after Tobu's departure.

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