Debt-saddled supermarket chain Daiei Inc. and its three major creditor banks are putting the final touches on a 400 billion yen bailout package that involves swapping some 300 billion yen in loans for Daiei shares, a source at one of the creditor banks said Wednesday.

Through the debt-for-equity swaps, 300 billion yen in loans will be converted into preferred shares, bringing Daiei's loans from the three banks -- UFJ Holdings Inc., Sumitomo Mitsui Banking Corp. and Fuji Bank -- down to 1.3 trillion yen from the current 1.6 trillion yen, the source said.

UFJ Holdings officials briefed the Financial Services Agency on the bailout plan Tuesday, the source said, adding that Daiei and the creditor banks are expected to finalize the package by the end of the week.

According to a report in the Wednesday morning edition of the Nihon Keizai Shimbun, the three banks abandoned their initial plan to grant partial debt forgiveness to Japan's largest retailer because they feared it would spark a public outcry.

The financial daily also reported that the three banks are contemplating retiring common stock owned by Daiei's founder, Isao Nakauchi.

According to the source, the three creditor banks also plan to retire preferred shares totaling 120 billion yen that they purchased last year.

The creditor banks have accumulated the 120 billion yen in preferred shares issued by Daiei and have established and raised a credit line of up to 500 billion yen for the ailing company since fall 2000, when its precarious financial situation surfaced.

Daiei will be able to use proceeds from the retirement of the preferred shares to offset losses incurred through its restructuring measures, such as closing outlets.

Daiei, buckling under the weight of 2.3 trillion yen in interest-bearing group debts, has said it is eyeing a new three-year restructuring plan beginning in March.

"We are currently drawing up a new three-year restructuring plan and just began talks with the three main creditor banks over the plan last week," remarked Daiei spokesman Mitsuru Sano. "Nothing specific, as stated in the report, has been decided."

The company plans to announce the restructuring plan in February.

Daiei to keep Hawks

Ailing supermarket operator Daiei Inc. will probably retain ownership of the Hawks professional baseball team under a revised restructuring plan being finalized with its three major creditor banks, according to sources.

The revised restructuring plan calls for turning part of Daiei's holdings of the Fukuoka Dome, the Hawks' home stadium, and the adjoining Sea Hawk Hotel & Resort complex, into securities and selling them to local interests.

The sources said Tuesday these proposals would be incorporated into a three-year restructuring program expected to be finalized this week between Daiei and its major creditor banks -- including UFJ Holdings Inc., Sumitomo Mitsui Bank Corp. and Fuji Bank.

The management of Daiei initially planned to sell its majority stake in the Hawks along with its majority holdings in Fukuoka Dome and the Sea Hawk as part of its massive restructuring program.

The management changed its mind about the Hawks apparently out of concern that local baseball fans might turn their back on Daiei if the supermarket chain sells the only pro team in Kyushu.

Daiei, weighed down by 2.3 trillion yen in interest-bearing loans, hopes to sell off its majority holdings associated with the Daiei Hawks operation in a bid to pare down its liabilities.

Daiei has run up 140 billion yen in debts due to its ownership in three baseball-related operations. Selling its stakes in the Fukuoka Dome and Sea Hawk Hotel & Resort complex would reduce its debt to under 100 billion yen.