Dai-ichi Hotel Ltd. effectively failed Friday morning when the Tokyo-based hotel chain and its four group firms filed with the Tokyo District Court for protection from creditors under the Corporate Rehabilitation Law.
Their liabilities total 125.5 billion yen, with Dai-ichi Hotel alone accounting for 115.2 billion yen of the sum, making it the largest Japanese hotel bankruptcy in the history of the industry, according to Teikoku Databank, a private research body.
A food company related to Dai-ichi is also expected to file for bankruptcy.
Dai-ichi Hotel had been having financial difficulties since it undertook an expansive business policy during the bubble economy, particularly after rebuilding Dai-ichi Hotel Tokyo, its flagship in Tokyo’s Shimbashi district.
The reopening of the flagship hotel coincided with the burst of the bubble economy and the hotel chain had since been in financial problems, compounded by the ensuing recession, said Takeshi Nebashi, president of Dai-ichi Hotel.
Dai-ichi Hotel had asked its main bank and other creditors to waive 23 billion yen in debts, but talks hit a snag, forcing the hotelier to take court action, Nebashi said.
“We could not avoid the conclusion that we will fall into financial trouble sooner or later. This is truly regrettable, but we decided to file for protection under the Corporate Rehabilitation Law,” said Nebashi, who will become business trustee of the firm.
Last month, Dai-ichi Hotel announced its business forecast of 23 billion yen in capital deficits and 29.5 billion yen in net losses on sales of 16 billion yen for the business year that ended March 31.
Although the hotel chain runs 43 hotels in Japan and three overseas, the protection will cover only seven domestic hotels, a lawyer for the firm said.
The Long-Term Credit Bank of Japan, the largest shareholder of the hotel chain, and Hankyu Corp., the second-largest shareholder, have promised to provide financial support and human resources for the rebuilding of Dai-ichi Hotel.
The Tokyo-based hotel was founded in 1937 and has about 470 employees.