• Compiled From Wire, Staff Reports


Pressure from creditor banks has forced debt-ridden retailer Daiei Inc. into deciding to seek help from the Industrial Revitalization Corp. of Japan, officials said Wednesday.

“I’ve just informed the minister that we will use the IRCJ,” Daiei President Kunio Takagi told reporters after meeting with Shoichi Nakagawa, minister of economy, trade and industry.

Nakagawa said he wants to “honor Daiei’s judgment as a private company.”

A senior METI official quoted Takagi as telling Nakagawa that he made the decision because Daiei would not be able to win auditors’ approval of its April-September financial report due out Friday in the face of threats by the banks to cancel the retailer’s loans.

Informed sources said Takagi will probably step down now that Daiei has failed in its attempt to turn itself around using private-sector funds only.

Daiei applied for the IRCJ for support, along with the main creditors — UFJ Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corp. — late Wednesday night. The IRCJ was expected to accept the application, the sources said.

Daiei’s revival would be the largest corporate rehabilitation for the IRCJ since its establishment in May 2003. The banks are likely to provide a total of between 400 billion yen and 500 billion yen in financial assistance to Daiei, the sources said.

“It’s good that the issue has been solved in this way,” Chief Cabinet Secretary Hiroyuki Hosoda told reporters. “I hope that Daiei will be rehabilitated in a way that will not have a (negative) impact on the economy.”

The IRCJ will now work on Daiei’s rehabilitation plan based on an earlier blueprint featuring the closure of at least 46 outlets by the end of the current fiscal year. Depending on asset-assessment results, Daiei may be forced to close down more stores and slash a substantial number of jobs, the sources said.

But on the contentious issue of whether to sell the Daiei Hawks professional baseball club, the IRCJ is likely to let the retailer keep the baseball club, along with profitable affiliated credit card company OMC Card Inc., they said.

On Tuesday, Takagi had formally rejected calls by the IRCJ and major creditor banks for Daiei to seek the entity’s help. Daiei had said it would only seek support from private companies.

The struggling retailer, which operates around 250 supermarkets, has been eyed up by U.S. investors, including retail giant Wal-Mart Stores Inc.

But its main creditor banks on Tuesday pressured Daiei to seek public help, warning they could otherwise stop extending assistance. Such action by the creditors could have led to a legal liquidation of the retail giant.

“I think Daiei is gradually coming to understand our position,” UFJ Bank President Takamune Okihara told reporters Wednesday morning.

Takagi and executives of the three banks resumed last-ditch talks Wednesday following a five-hour meeting that lasted until midnight Tuesday.

The three lenders pressured Daiei in the hopes of expediting their bad-loan writeoffs. An IRCJ-led restructuring would boost Daiei’s creditworthiness and allow lenders to upgrade billions of yen of remaining Daiei loans, currently judged as nonperforming.

The creditors were also worried that accepting Daiei’s own revival plan, which would entail fresh financial assistance, could prompt lawsuits by their shareholders because they already provided Daiei with aid in 2001 and 2002.

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