Struggling dairy product maker Snow Brand Milk Products Co. has drafted a rehabilitation program that features a 90 percent reduction in capital and financial assistance from major creditor banks, sources close to the program said Friday.
Snow Brand will finalize the program after carrying out negotiations next week with creditor banks, including Norinchukin Bank, UFJ Bank and Mizuho Corporate Bank, the sources said.
Under the plan, Snow Brand Milk hopes to receive 50 billion yen through debt waivers and a debt-for-equity swap, the sources said.
In return, Snow Brand will take drastic cost-cutting measures, and all its executives will be asked to resign to take the blame for the company's current plight.
Snow Brand Milk said in April the firm will spin off its unprofitable milk business and set up a new entity to be run jointly with the National Federation of Agricultural Cooperative Associations (Zen-Noh).
It plans to slash its workforce to 1,500 from the current 4,500, but Zen-Noh has asked for additional cost-cutting. measures, including the closure of some factories, as a condition for joining the milk business.
The proposed financial assistance is meant to make up for the net excess of debts over assets that Snow Brand Milk may suffer this business year, the sources said.
The ailing dairy product maker has been hit hard by a series of scandals, including a beef-mislabeling scam by its subsidiary Snow Brand Foods Co., which disbanded in April.