228.9 billion yen debt sinks Dutch-style theme park

Huis Ten Bosch Co., operator of a 17th century Dutch theme park in Sasebo, Nagasaki Prefecture, collapsed under 228.9 billion yen in debt Wednesday after Mizuho Holdings Inc. cut off funding in a race to resolve problem loans.

The failure of Huis Ten Bosch, Dutch for “House in the Forest,” represents the largest failure of a theme park operator in Japan. It is the second largest failure of a public-private enterprise since the 2001 failure of Phoenix Resort Ltd., which ran the Seagaia luxury resort in Miyazaki Prefecture.

Seagaia is now undergoing rehabilitation under U.S. equity fund Ripplewood Holdings LLC.

Bank analysts welcomed the failure as a sign that regional political claims will not deter reforms of the nation’s banks, which are under pressure to halve the ratio of their problem loans by March 2005.

The complex cost 250 billion yen to build in 1992, with bricks imported from Holland to create a duplicate of a Dutch village, including 6,000 meters of canals over 1.5 million sq. meters of lush grounds.

The massive complex — with four hotels, 13 attractions, 11 museums and 250 luxury holiday homes — never once made it into the black.

With Mizuho refusing the park’s requests for a third round of debt-forgiveness, the operator had to file for court protection from creditors at the Nagasaki District Court under the Corporate Rehabilitation Law.

In 2000 and 2001, Industrial Bank of Japan, now part of Mizuho, forgave 53.3 billion yen in loans. However, the political considerations that were behind those moves have petered out, said a Mizuho executive who asked not to be named.

Launched with the backing of Nagasaki prefectural and Sasebo municipal governments, the project was considered essential to transforming the area into a tourist magnet.

“If politicians really meant for us to pursue profitability, we would probably not have gone on with (the debt-forgiveness schemes),” said the former IBJ executive. “There were very strong considerations about how the theme park’s failure would affect the region.”

The restructuring program, which included the closure of Nagasaki Holland Village in October 2001, never indicated how the park was to increase earnings, he said. Mizuho said it may not be able to recover 102.3 billion yen.

“It’s just another example of a main bank throwing good money after bad, offering more loans without any real promise of profit,” said Hirotake Araya, general manager at Tokyo Shoko Research Ltd., a credit research company.

Kenji Ueda, executive director at Ripplewood Japan Inc., added, “Huis Ten Bosch is a theme park, not a resort, and has had problems attracting repeat visitors.” He suggested that drawing tourists from Hong Kong and South Korea may be a possibility, but would likely prove difficult.

Huis Ten Bosch’s failure, which came before the end of a five-year restructuring plan drawn up in October 2001, bodes ill for other quasi-public enterprises.

Of the 1,708 private-public companies that disclose their financial reports, 51.9 percent are insolvent or are strongly suspected to be insolvent, according to Teikoku Databank, a private-sector think tank.

Leisure and resort companies like Huis Ten Bosch make up over a quarter of these so-called third sector companies.

Like its counterparts nationwide, Huis Ten Bosch was unable to stem the tide of declining visitors, down from a peak of 4.2 million in fiscal 1996 to 3.5 million in fiscal 2001.

In fiscal 2001, Huis Ten Bosch ranked ninth in Japan among leisure facilities, with Tokyo Disneyland and Tokyo DisneySea topping the list, according to Sogo Unicom Co., a publisher on the leisure industry.

The theme park operator has been struggling to make interest payments on 225 billion yen borrowed to cover construction costs.

Huis Ten Bosch received a certificate of commendation from the Prime Minister’s Office for its tree-planting efforts. In its 10 years of operation, it has spent 48.7 billion yen on ecological endeavors.