Major road paver Nippon Hodo Co. said Tuesday it has agreed in principle to help failed Dai Nippon Construction rebuild its operations, including a measure to purchase a majority stake.
Under the agreement, Nippon Hodo will buy most of the new shares to be issued by Dai Nippon Construction after it reduces its capital, on condition that Dai Nippon Construction’s parent firm, Kinki Nippon Railway Co., and major creditor banks provide financial support, it said.
Nippon Hodo, an affiliate of Nippon Oil Corp., said other details of the plan remain subject to negotiations involving the two companies and other parties concerned.
Dai Nippon Construction plans to issue new shares worth between 2 billion yen and 3 billion yen to Nippon Hodo, Kinki Nippon Railway and UFJ Bank, Dai Nippon Construction’s main creditor bank, company officials said.
Nippon Hodo said it agreed to support Dai Nippon Construction because its road pavement business does not overlap Dai Nippon Construction’s civil and railway construction operations.
The company said it expects to capitalize on Dai Nippon Construction’s expertise in water supply and sewerage construction to help expand its civil construction business.
On July 5, Dai Nippon Construction, based in Gifu Prefecture, filed for court protection from creditors under the Civil Rehabilitation Law with parent-only debts of 271.2 billion yen. The Tokyo District Court granted the request July 10.
Nippon Hodo’s involvement in Dai Nippon Construction’s restructuring was included in a court-mandated restructuring program presented to the district court Tuesday afternoon, company officials said.