The state-backed Industrial Revitalization Corp. of Japan is taking longer than expected to select its first revival candidate, IRCJ President Atsushi Saito said Friday.

Saito’s confession came during the IRCJ’s meeting with high-ranking Bank of Japan officials, according to an IRCJ official who briefed reporters after the closed conference.

The entity, tasked with turning around beleaguered businesses, is having a hard time deciding where to begin. It had earlier promised to announce the much-awaited first choice by the end of June or early July.

Saito blamed the delay on banks and their borrowers, which jointly submit restructuring plans to the IRCJ. He said those plans are not thought-out and are still in their early stages, the IRCJ official said.

Other IRCJ officials said a number of cases have been submitted for consideration but refused to give details.

The IRCJ, which began operations in May, is tasked with buying up bank loans to ailing companies within the next two years, resuscitating the companies and then selling the loans back to the private-sector within three years.

As the IRCJ has no legal power to force banks to sell loans, it has asked the BOJ to encourage them to do so. It has also asked the BOJ to prod banks to adopt a strict, U.S.-style loan assessment technique.

The IRCJ will be using this discount cash flow technique itself.

Loan assessment is key to the IRCJ’s agenda. It cannot afford to buy loans at excessive prices because doing so would open it up to losses when it resells the loans on the market.

The BOJ, which has long advocated the use of the discount cash flow system by banks, has agreed to lend its weight, according to the IRCJ official.

Friday’s meeting with the central bank follows a similar one held with the Financial Services Agency in late May.

Give IRCJ time: minister

It may take time for creditor banks to start using the Industrial Revitalization Corp. of Japan to rehabilitate their major corporate clients, Sadakazu Tanigaki, minister in charge of industrial revitalization, said Friday.

“It seems (creditor banks) are observing how the IRCJ will handle cases to see whether they can use it for their important clients,” Tanigaki said, referring to major banks’ hesitancy to resort to the IRCJ for companies in which they hold shares.

Since it was launched May 8, the IRCJ has already held consultations with heavily indebted companies about their chances of becoming candidates for rehabilitation.

But no large companies or their creditor banks have yet approached the IRCJ.

Tanigaki said the IRCJ’s first case must be well received so that it encourages other companies, including larger ones, to use it.

“We want (companies) to make decisions to use (the IRCJ), although it may take courage for managers to reveal their management problems,” Tanigaki said.

The IRCJ, which is charged with helping indebted but viable companies, is expected to select its first clients as early as July.

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