Department store chain Isetan Co. said Tuesday it will provide financial and operational support to struggling Iwataya Department Store Co. to help the Fukuoka-based retailer rehabilitate under its wing.

Isetan President Shinichi Muto said Isetan will purchase 750 million yen in new Iwataya shares -- a stake of more than 10 percent -- and become in the process its largest shareholder.

Tokyo-based Isetan will also dispatch a new president and another executive in May and will offer expertise in the fields of marketing, merchandise development, visual presentation and operational systems, Muto said.

As a condition of the deal, however, Iwataya has been asked to ensure that its creditors agree to support its three-year restructuring plan, which was revealed on Feb. 26.

The reconstruction program includes a 28 billion yen debt waiver from its creditor banks, including Fuji Bank and Bank of Fukuoka, 300 redundancies, and the liquidation of unprofitable businesses.

Iwataya will reduce its capital by half after obtaining approval at a shareholders' meeting in early May. It also plans to slash its interest-bearing group debts from 89.6 billion yen to about 70 billion yen via these measures and asset sales.

Iwataya held the first meeting of creditors in Fukuoka the same day to seek approval of its rehabilitation plan.

The retailer is expected to ask Bank of Fukuoka and Fuji Bank for more than 1 billion yen in additional loans, industry sources said.

Muto said that, by taking Iwataya into its department store group, Isetan can increase its buying power over suppliers and reduce costs in developing computer systems to procure goods and operate its outlets more efficiently.

Iwataya, whose roots date back about 250 years, operates eight outlets in Fukuoka, Kumamoto and Nagasaki prefectures.

The retailer has been shaken by sluggish consumer spending, with its group operating revenues falling 28.6 percent to 145.7 billion yen in the 2000 business year.

Iwataya sold its full stake in a supermarket subsidiary to retailer Seiyu Ltd. in August, but still had a negative net worth of some 16.5 billion yen on a consolidated basis at the end of August.

For the business year to Feb. 28, Iwataya projects unconsolidated net losses of 24.8 billion yen and a negative net worth of 28.3 billion yen. It expects to clear the negative net worth with its restructuring plan.

It is a member company of the All Nippon Department Sores Development Organization, which was established in 1973 with Isetan as the core organizer. The group is now comprised of 33 retailers operating 71 outlets around the nation and jointly procures and develops products.