Construction company Tobishima Corp. said Tuesday it has devised a new rehabilitation plan to cut its group interest-bearing debts of 135 billion yen by 50 billion yen over three years.

The plan features financial help from Fuji Bank.

Tobishima said that in parallel with the debt repayment plan, it will eliminate by March 31 88 billion yen in guarantee-related obligations for debts repayments by its group companies to 33 creditor financial institutions.

Tobishima President Yoshiharu Tomimatsu, speaking at a news conference, also announced that the company plans to form a business tieup with construction firm Taisei Corp.

Fuji Bank said in a statement, "We plan to continue to support Tobishima Corp. as our bank gives high marks to the new three-year program Tobishima has submitted."

The bank, one of the three component banks of Mizuho Holdings Inc., said the new reconstruction program is meant to bolster the earnings of Tobishima with the backing of Taisei.

As a first step to eliminate the debt guarantees, Tobishima will ask the 33 creditors for a reassessment of the debts at "current values" to cut them to around 11 billion yen, Tobishima and Fuji officials said, adding that the bank will then provide the loans necessary for paying off the obligations later this month.

As Tobishima repays the remaining 11 billion yen, its net worth will shrink by the same amount, they said.

To make up for the shrinkage, Tobishima will provide Fuji with 10 billion yen in preferred shares without voting rights in the 2002 business year, which starts in April, allowing Tobishima to convert its new 11 billion yen debt into preferred shares, it said.

Tobishima will cut its separate 135 billion yen worth of interest-bearing debts by 50 billion yen through asset sales and corporate downsizing programs as well as profits from the subsequent three years of operations, the company said.

"We will return to the policy of pushing our core construction business centering on civil engineering works," Tomimatsu said. Concluding a tieup deal with Taisei "would be most appropriate to complement our creditability as we belong to the same Fuyo group of companies and have had business transactions with each other."

Tobishima hopes an alliance with Taisei will enable it to cut costs and boost profitability by jointly procuring construction materials, as well as increase its chances of obtaining more orders, the firm said.

Previously, Tobishima had planned to repay the 88 billion yen in guarantee-related obligations in installments over the next 15 years but changed tack as investment in construction by the government and the private-sector has been shrinking rapidly.

In 1997, creditors to Tobishima agreed to waive claims on a 640 billion yen of its 740 billion yen in obligations, which it incurred from debt-repayment guarantee arrangements for its affiliates.

Tobishima, which has 3,000 employees, booked a group net profit of 200 million yen on revenues of 323 billion yen for the year that ended in March 2001.