A group of medical institutions has provided its members with guidelines for issuing bonds in an attempt to raise funds as the country’s credit crunch begins to hit hospitals, group sources said Tuesday.

The Association of Japanese Healthcare Corporations will prepare for actual bond issuance while closely following Health, Labor and Welfare Ministry moves to draw up similar guidelines by the end of this year, the sources said.

Medical institutions have procured sizable funds, either from their own capital or from financial institutions. No laws prohibit the issuance of so-called hospital bonds, but no records indicate such bonds have ever been issued, they said.

Under the guidelines of the 1,450-member group, medical institutions can offer 490 million yen worth of unsecured bonds to no more than 49 individual investors. They will be issued in the institutions’ local regions and at a standard interest rate of 1 percentage point above that of long-term Japanese government bonds, according to the sources.

The association will set up a body to screen and certify issues, which can take place twice a year.

The guidelines require issuers to limit the funds’ uses to investments for building or remodeling hospital wards or computerizing their operations. But issuers cannot use the funds to cover shortages in their operating costs.

The guidelines essentially ban the resale of any bonds issued and require issuers to limit allocation to the families and relatives of their heads to one-third of the total. The restrictions are an attempt to prevent companies from acquiring a say in hospital operations and to avoid family management.

It remains uncertain whether the bonds can lure a sufficient number of investors, the sources said.

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