Daiei will not get state
help, agency officials say
Daiei Inc., Japan's third-largest retailer, must cut debt without government aid after a deadline set by a state bailout agency passed, agency officials said.
The agency decided it wouldn't help Daiei, even if asked, after a midnight deadline yesterday, officials from the Industrial Revitalization Corporation of Japan, who asked not to be identified, said. Daiei President Kunio Takagi met with Atsushi Saito, chief executive officer of the IRCJ, yesterday in Tokyo to discuss whether the agency will continue evaluating the retailer's books.
Kobe, Japan-based Daiei, with about $9.1 billion in debt, has been resisting creditors' demands that the IRCJ lead its reorganization. Daiei may now turn to investors such as Wal-Mart Stores Inc. and Marubeni Corp. Bidders will present their revival plan to Daiei and the banks on Monday.
"The banks aren't willing to accept the private solution because they can re-categorize loans to Daiei quickly through the IRCJ," said Peggy Furusaka, co-head of credit research at BNP Paribas SA in Tokyo. "Daiei wants to exert leverage on what it has at the moment and to protect assets because they would probably be sold at a discount if it goes to the IRCJ."
UFJ Bank Ltd., the biggest contributor to the 520 billion yen of aid in the two prior rescue bids, has led efforts by banks to force Daiei to accept state help, in part to reduce UFJ's own bad-loan tally before a merger next year with Mitsubishi Tokyo Financial Group Inc. UFJ has said it won't provide aid to Daiei without the IRCJ's involvement.
Daiei did not respond by noon today to the bailout agency's midnight deadline for the retailer to decide whether to apply for rescue help, an IRCJ senior official said. The IRCJ will as early as today withdraw as many as 250 accountants and lawyers involved in the Daiei review, the official said.
Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are Daiei's other two main lenders.
Daiei's Takagi met executives of the banks last night, after meeting the bailout agency's Saito. Takagi repeated his request that banks support his recovery effort and talks would continue, he told reporters outside his home in Chiba, near Tokyo.
"I've heard that Daiei asked the IRCJ to continue due diligence," Takamune Okihara, president of UFJ Bank, told reporters later outside his home in Tokyo. "I haven't heard the IRCJ will pull away from Daiei's due diligence. The banks are continuing talks with Daiei, but I believe Daiei will eventually come around to our way of thinking. We won't provide financial assistance to Daiei without working with the IRCJ," he said.
Daiei's future led to a dispute yesterday within the Japanese government that included a statement from Chief Cabinet Secretary Hiroyuki Hosoda, the government's official spokesman, who said Prime Minister Junichiro Koizumi wants Daiei and its lenders to resolve the aid issue on their own. Hosoda today said the government will not force Daiei to seek agency help.
The retailer is seeking preliminary proposals from potential investors that include Wal-Mart, Cerberus Partners LP, Marubeni Corp. and Ripplewood Holdings LLC for a decision by Mondayon who will lead its bailout plan.
Daiei said in a statement today that it will continue negotiating with its three creditors and other parties it didn't name.
