Towa Real Estate Development Co. said Thursday it is seeking a 230 billion yen bailout package from UFJ and other creditor banks under a new five-year restructuring program.
The package includes 200 billion yen in debt relief and 30 billion yen in debt-for-equity swaps, the condominium developer said.
Towa said it expects its creditor banks to implement the measures in March; the restructuring program would start the following month.
If the banks oblige, it will be their second bailout of Towa.
The bailout would allow Towa to write off some 189 billion yen in real estate investment losses and some 78 billion yen in claims on its subsidiaries, including nonperforming loans, the company said.
Towa’s restructuring program also calls for reducing its core capital by 23.2 billion yen, to 2.6 billion yen. The cash would be used to help consolidate interest-bearing liabilities, which it hopes to reduce by 300 billion yen by the end of March 2005. As of March 31, Towa had 521.3 billion yen in liabilities.
The company said it will implement a one-for-two reverse stock split to keep the number of outstanding shares at an appropriate level after the debt-for-equity swap.
It will also reduce the size of its board to 12 from 17 and slash its workforce by 14.5 percent to 528 after March 2005.
The company said the 20 percent cut in wages and bonuses for managerial staff will be maintained to reduce labor costs by 10 percent.
The restructuring measures have forced Towa to lower its earnings projections for the fiscal first half, which ended Sept. 30.
Towa now expects to incur a group net loss of 82.5 billion yen, instead of breaking even as earlier projected, and a group pretax loss of 1 billion yen, compared with an earlier projected loss of 450 million yen.
Group sales are now estimated at 49.9 billion yen, down from the earlier projected 52 billion yen.
Towa also downwardly revised its projected group net balance for the year to March 31 and expects a group net loss of 33.8 billion yen, against the earlier projected net profit of 650 million yen.
Towa said it anticipates the huge net loss because it plans to book 263 billion yen in one-time losses, including 108 billion yen in appraisal losses and capital losses on real estate holdings.
The company left its group pretax profit outlook unchanged at 12 billion yen but cut its sales forecast to 198 billion yen from the earlier projected 202 billion yen.
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