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Seibu Department Stores Ltd. will increase its capital in an effort to wipe out a large capital deficit left by Seiyo Corp., a real estate developer in its Saison retail group, sources familiar with the move said Sunday.

Seibu Department Stores, the main entity in the Saison group, is finalizing arrangements to have fellow group companies, such as Credit Saison Co., jointly provide funds for the capital increase, the sources said.

Group companies’ support for the capital increase is expected to amount to tens of billions of yen at the most, they added.

The group has basically agreed to give about 100 billion yen to help cover Seiyo’s 389 billion yen deficit, the sources said.

Seibu Department Stores reportedly plans to sell some of its stock holdings and securitize its flagship store in Tokyo’s Ikebukuro district to raise funds for the undertaking.

The department store operator, which is the main stockholder in Seiyo, will shortly suggest a way to deal with Seiyo to creditor banks, the sources said.

Seiyo and its affiliates are saddled with a combined 500 billion yen capital deficit from failed real estate investments in the late 1980s asset-inflated bubble economy, and the company has been consulting with Seibu Department Stores on a way out.

But Seibu’s own capital as of the end of February 2000 was about 8.2 billion yen, which means that it could potentially fall into a deficit itself if it opted to bear a large part of Seiyo’s liabilities.