New industrial revival minister Kazuyoshi Kaneko shrugged off accusations that the Industrial Revitalization Corp. of Japan has a “small potatoes” approach to rescuing ailing firms.
He called for a long-range perspective in judging the body’s performance.
Kaneko, who was assigned to his first stint as a Cabinet minister by Prime Minister Junichiro Koizumi, stressed that the work of the IRCJ is time-consuming.
The state-backed IRCJ debuted in May, having 10 trillion yen at its disposal to buy up the loans of heavily indebted firms over two years.
It is designed to solve the nation’s bad-debt problems by buying loans extended to ailing firms, turning them around and selling them back to the private sector within three years of acquisition.
“Whether the IRCJ deals only with small ones or not, we want you to judge in the long range,” Kaneko said in a media interview. “The IRCJ has a lot of work before deciding to rescue firms — the decision means we have managed to mediate the interests of creditors, have a sure bet on the firms’ viability and have decided that the firms meet all the criteria (for making a successful exit to the market).
“It is only natural that small ones come first, as they tend to involve fewer creditors and are easy to find sponsors. Larger deals need more time.”
Kaneko’s remark comes a month after the IRCJ announced that four companies, including a Kyushu bus operator and a Fukushima department store, were to be put under its control under an initial bailout maneuver.
Despite initial expectations that the IRCJ would push for the reorganization of overcrowded sectors such as retail and construction, the targeted firms are relatively obscure and located in rural areas, raising questions over the body’s performance.
The IRCJ has also drawn flak from some buyout experts for possibly taking fledgling turnaround business away from the private sector. Kaneko, who hails from Gifu, rejected this latter scenario.
“We have heard similar arguments in the discussions leading up to the creation of the Resolution and Collection Corp. (in 1999) and again in the establishment of the IRCJ (in May),” he said. “But the biggest reason why the private-sector turnarounds have not fully taken off is that creditor banks have conflicting interests (and cannot agree on a debtor’s restructuring plan).
“Even when ‘blue-eyed’ investment funds go visit the banks, the banks wouldn’t sell their loans.”
On the IRCJ’s next move, Kaneko said another decision to rescue firms “will come in the not-so-distant future.” He refused to elaborate on the timing of the official announcement.