Tokyo-based Kenwood Co. said Friday it will conduct a 25 billion yen debt-for-equity swap to drag itself out of negative net worth.
At present its liabilities exceed its assets by 17 billion yen.
As part of the deal, approved at a board meeting the same day, the ailing audio equipment firm will issue preferred shares to Asahi Bank, its largest lender, in exchange for an interest-bearing debt writeoff of 25 billion yen.
Asahi Bank will also set up a new 20 billion yen commitment line, the firm said.
In a separate deal, the firm secured a three-year loan servicing schedule from 16 banks that allows it to pay back its debts based on its cash-flow situation.
Kenwood said it will raise another 2 billion yen by issuing common stocks in a third-party allotment to funds managed by Sparx Asset Management Co. and Merrill Lynch Investment Managers Co.
This third-party allotment will be carried out in mid-October, while the debt-for-equity swap should be approved at an extraordinary shareholders' meeting slated for early December, the officials said.
In all, the firm should be able to erase liabilities in excess of asset worth 17 billion yen well ahead of its initial plan to do so by the end of March 2004, said Haruo Kawahara, president and CEO of Kenwood. Kenwood will also shift its resources toward developing competent business fields, he said.