Sojitz Holdings Corp. is considering seeking about 300 billion yen in financial aid from its main creditor, UFJ Bank, to help bolster its capital base, sources close to the move said Saturday.
The financial assistance to the holding company of trading house Sojitz Corp. is likely to take the form of a debt-for-equity swap and preferred share issuance, the sources said.
Sojitz hopes to use the proceeds to repay its interest-bearing debt worth 2 trillion yen and dispose of latent losses on its asset holdings, the sources said.
Sojitz and UFJ Bank, a core unit of UFJ Holdings Inc., are expected to work out the details of the financial assistance by the end of August, while Sojitz Holdings President Hidetoshi Nishimura and other executives are expected to resign to take the blame for the financial trouble.
Sojitz is a large-lot borrower of the UFJ banking group. The planned capital contribution to the trading house group apparently reflects the UFJ group’s efforts to rebuild its ailing large-lot borrowers before integrating its operations with Mitsubishi Tokyo Financial Group Inc.
If the provision of financial aid to Sojitz goes smoothly, the UFJ group will begin working on the reconstruction of other financially troubled large borrowers, banking industry observers say.
The UFJ group is expected to drop an initial plan to ask the Industrial Rehabilitation Corp. of Japan, the government-backed corporate revival body, for help to rescue Sojitz.