OSAKA — Struggling general contractor Arai-Gumi Ltd. said Friday it has agreed with Konoike Construction Co. to form a capital and operational alliance, a move orchestrated by their main lender, Sumitomo Mitsui Banking Corp., to assist Arai-Gumi.
The two midsize general contractors, based in the Kansai region, reached the agreement as part of a restructuring plan announced the same day by Arai-Gumi.
The plan includes a request for 64 billion yen in debt waivers to major creditors.
To facilitate the alliance, company sources said SMBC, which extended 70 billion yen of Arai-Gumi’s interest-bearing debts of 100 billion yen, will waive around 50 billion yen of the loans.
Arai-Gumi will also cut its 2.96 billion yen in capital, and Konoike will buy new shares to be issued by Arai-Gumi.
The firms will also team up on taking orders and other operations, Arai-Gumi said.
Arai-Gumi’s top executives, including President Shojiro Hanafusa, will resign to take the blame for the firm’s poor performance.
The firm is on the verge of falling into negative net worth due to latent losses on real estate held chiefly by subsidiaries. Against the backdrop of collapsing finances, Arai-Gumi has been seeking financial help from its major creditor bank and an alliance with Konoike.
Established in 1944 and based in Nishinomiya, Hyogo Prefecture, Arai-Gumi focuses on condominiums and other private-sector works. It has a stronghold in the prefecture and is listed on the first section of the Tokyo Stock Exchange.
With 11 branches and 21 sales outlets nationwide, the company posted consolidated sales of 144.4 billion yen in the year that ended in December but suffered a group net loss of 800 million yen. Its workforce totaled 1,108 as of December.
With a history dating back to 1871 and established as a corporate entity in 1918, Konoike has 14 branches nationwide and has been actively promoting overseas operations with offices and subsidiaries in Myanmar, South Africa, Tanzania, Thailand and the United States.
Capitalized at 20 billion yen, the unlisted company suffered a consolidated net loss of 2 billion yen on group sales of 373.4 billion yen in the year that ended in September. It has a workforce of about 4,000.
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