Sojitz Holdings Corp., the parent of troubled trading house Sojitz Corp., announced Friday it will seek a capital injection of around 250 billion yen from UFJ Holdings Inc., the UBS group of Switzerland and other financial institutions.
The announcement came a week after UFJ, Sojitz’s main lender, publicized the fact that it was in merger talks with Mitsubishi Tokyo Financial Group Inc.
UFJ, the country’s fourth-largest lender, has been under intense pressure to slash bad loans as it lags well behind its rivals.
The implications of UFJ’s merger plan for its large problem borrowers has been the focus of rampant speculation.
Sojitz Holdings said it will spend some 250 billion yen to “wipe out future risks of additional losses” by withdrawing from unprofitable operations, liquidating real estate properties and writing down the value of its assets.
The company did not reveal which other financial institutions will be tapped for capital injections, saying it will work out various details — including the exact figure of the injection — by early September.
Under the plan, the company will also slash its interest-bearing debts by one-third to 1 trillion yen within three years. The trading house was created in April via a merger between Nissho Iwai Corp. and Nichimen Corp.
Following Sojitz Holding’s announcement Friday evening, UFJ said it was positively considering a capital injection.
Sojitz Holdings President Hidetoshi Nishimura told a news conference that the rehabilitation plan is aimed at regaining investor trust by eliminating future risks.
UFJ Holdings President Ryosuke Tamakoshi said during a news conference last week that the firm would solve its bad-loan problems before merging with MTFG in the first half of the next fiscal year.
Lenders looking to clean up their bad loans must set aside money to write off unrecoverable loans or help borrowers turn themselves around. Thus, loans extended to these borrowers are no longer categorized as nonperforming.
In the wake of Sojitz Holdings’ announcement, attention will now be focused on the rehabilitation efforts of UFJ’s other problem borrowers, such as supermarket chain Daiei Inc. and condominium builder Daikyo Inc.
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