Troubled Japanese property firm Towa Real Estate Development Co said on Thursday that UFJ Bank and other creditors were positively considering its request for 230 billion yen ($1.89 billion) in financial aid.
TowaÂ's main creditor UFJ Bank, a core unit of UFJ Holdings Inc., said in a statement that it was 'considering accepting the request' after giving high marks to TowaÂ's new restructuring plan, but analysts questioned whether the bailout would be enough to revive the firm.
In 1999, Towa Real received a Y290-billion debt waiver from its creditor banks and Fujita Corp., Towa´s biggest shareholder. After splitting its real estate operations, construction company Fujita continues to hold a 17.5% stake in Towa.
With the aid, Towa plans to write off Y267 billion ($2.19 billion) in unrealized real estate losses and losses related to its affiliates.
Under a new five-year plan ending March 2008, the company aims to reduce group interest-bearing debt to Y287 billion ($2.36 billion) by the end of March 2004 and to Y205 billion ($1.68 billion) by the end of March 2008 from Y325 billion ($2.67 billion) expected at the end of March 2003. It had debt of Y585 billion ($4.81 billion) at the end of March 2002.
Towa Real Estate will also reduce capital by Y23.2 billion ($191 million) to Y2.6 billion ($21 million) to generate profits to cover deficits stemming from the special loss.
The company will conduct a 1-for-2 reverse stock split as the number of stocks will increase as a result of the planned debt-for-equity swap. The reverse split will subsequently increase Towa´s capital to Y17.6 billion ($145 million) .
Towa Real Estate will reduce its workforce by 14.5% to 528 by the end of March 2005. The company will also try to reduce personnel costs by 10% a year through a reduction in salaries and bonuses.
Towa now expects a group net loss of Y33.8 billion ($278 million) for the year through March 2003 due to the special loss. It previously estimated a profit of Y650 million ($5.3 million). Its group revenue outlook for the full year was cut to Y198 billion ($1.63 billion) from Y202 billion ($1.66 billion).
For the first half through September, Towa now sees a group net loss of Y82.5 billion ($678 million), compared with its earlier forecast to break-even. It also reduced its group revenue outlook to Y49.9 billion ($410 million) from Y52.2 billion ($430 million).
On a parent basis, the company expects a net loss of Y41.2 billion ($339 million) for the full year compared with its previous outlook of a net profit of Y600 million ($4.9 million).
(source: Reuters and Dow Jones)