Ailing Kanebo Ltd. unveiled on Monday a revival plan that features a 99.5 billion yen debt waiver and consolidation into the toiletry and Chinese medicine businesses.

The toiletry and textile maker also reported a negative net worth of 355.3 billion yen in the just-ended fiscal year on a group net loss of 357.7 billion yen.

Under the revival plan, the government-backed Industrial Revitalization Corp. of Japan will hold a majority stake in the firm, committing itself to the largest turnaround project it has taken up so far.

The announcement came a little over three months after the debt-ridden company walked away from an all-but-agreed-to deal to sell its mainstay cosmetics business to Kao Corp., and instead sought the help of the IRCJ.

“As a result of executing the plan, a number of our peers will have to leave Kanebo,” Kanebo President Akiyoshi Nakajima told a news conference in Tokyo. “It is a very painful thing, but we had no choice.”

Nakajima said the company will trim 1,800 jobs, or some 38 percent of its total workforce, during the three years through March 2007.

The bulk of the reduction is likely to be in its loss-making textile unit. Kanebo will terminate its natural fiber business and drastically downsize artificial fabrics operations, though no timetable has been set.

The company already spun off its cosmetics business — the country’s second largest — in which it now has only a minority stake, with 86 percent held by the IRCJ.

The latest revival plan has been widely anticipated by industry watchers, who wonder how the company can turn itself around after parting with its cash cow. Kanebo’s cosmetics business was effectively bankrolling its other bleeding businesses.

The history of Kanebo’s textile unit dates back to the company’s very beginning in 1887. But Japanese textile makers have been suffering in recent years due to cheap competition from Asian rivals.

The company said it will bet its future on household products, such as bath items and toiletries, and pharmaceutical operations. It is the nation’s top maker of over-the-counter Chinese medicine.

IRCJ’s managing director, Ryutaro Katayama, said at the news conference that a lack of business focus has allowed unprofitable operations to keep bleeding, resulting in massive debts. The debts stood at 601.37 billion yen as of the end of March.

Of the total debt waiver planned, Sumitomo Mitsui Banking Corp., Kanebo’s main lender, will forgive 41.1 billion yen and buy some 30 billion yen in equity in the form of preferred shares. The rest of the debt waiver will come from nearly 100 other lenders.

The IRCJ will inject some 20 billion yen in capital, buying enough vote-carrying common shares to become the company’s majority shareholder.