Lenders expect TOKYO >> Mizuho Holdings Inc. and two other main lenders expect indebted Daiei Inc. to regain health, the head of the Japanese Bankers Association said today, indicating they will grant debt relief the troubled retailer is seeking.
Daiei to survive,
banker says
The comments by Mizuho's
co-CEO suggest the retailer's
debt relief request will be grantedBy Mariko Iwasaki
Bloomberg News"We view Daiei's request positively," said Yoshiro Yamamoto, chairman of the industry group and co-chief executive officer of Mizuho. "We're impressed with management moves to close unprofitable stores and accelerate other cost cuts."
Japan's second-largest retailer, burdened by ¥2.3 trillion ($17 billion) of debt, asked its main creditors for ¥;420 billion of relief four months after bankers refused further support to another retailer, Mycal Corp., which subsequently filed for court protection.
"Our basic stance is to help troubled companies that have the potential to survive and abandon those that don't," Yamamoto said. "Size, big or small, isn't a determining factor."
Yamamoto also said the lenders received no suggestions from the government regarding Daiei. However, Prime Minister Junichiro Koizumi's administration has been supportive of Daiei's plan.
Yesterday, Financial Services Agency Commissioner Shoji Mori said it was consistent with the government's program to push structural reforms for banks and businesses.
"We feel (Daiei's plan is) the kind of rehabilitation that is consistent with the government's policy," Mori said.
Daiei has asked banks to forgive ¥300 billion of its credits and retire ¥120 billion worth of its preferred stock. Shares of Mizuho, UFJ Holdings Inc. and Sumitomo Mitsui Banking Corp. -- the retailer's three key lenders -- have fallen amid investor concern Daiei's plans won't be enough to save it.
"The way the banks and Daiei handled the problem makes me wonder where the government draws the line on which company is allowed to go bust," said Shuichi Hida, who helps manage ¥160 billion at Sanyo Investment Trust Management Co.
Yamamoto helped draft new guidelines banks adopted in September, under which Daiei would have to fire managers responsible for its financial woes and draft a three-year debt-reduction plan acceptable to all creditors.
Those guidelines have proved effective, as Daiei didn't get quick-and-easy debt relief, said Akira Mizobuchi, a banking analyst at Nomura Securities Japan Ltd.
"Executives have resigned; shareholders are taking a hit (from a capital reduction) and only the main lenders will take losses, so the spirit, if not the letter, has been followed," Mizobuchi said.
Separately, Yamamoto reiterated that Japan's biggest banks won't need injections of public funds and will have enough capital at the end of March to meet international standards.
Daiei stock. posted a rebound today after falling yesterday as investors continued to have mixed reactions to the restructuring package.
The retailer was the best performer on the Tokyo Stock Exchange's First Section in terms of percentage gain, soaring 20.86 percent, or ¥24, to close the day at ¥139.
Daiei shares fell by the stock's daily limit of ¥50 to 115 yesterday. Investors were disappointed about the 50 percent cut in capital affecting common shares included in its restructuring plan announced late Friday.
Brokers said such volatile moves were mainly due to individual investors trying to pocket short-term profits.
"It's becoming a money game," said Yuji Ono, a manager in the equity division of Nikko Cordial Securities Inc.
The rebound in Daiei shares didn't help the broader market.
The Nikkei 225 had its biggest decline in a week, dropping 229.27, or 2.2 percent, to 10,050.98. Losses in key indexes accelerated after reports that Kmart Corp. was expected to seek bankruptcy protection today, renewing concern Japan's largest trading partner won't recover from its economic slump as early as expected.