• Kyodo News


Consumer loan lender Orient Corp. said Wednesday it will receive a 290 billion yen capital injection from Mizuho Financial Group and other companies to wipe out a negative net worth it will develop due to huge losses in the 2006 business year.

Of the total, 150 billion yen will come from the flotation of preferred shares and the remaining 140 billion yen will be procured via a debt equity swap. Both deals will be completed May 2.

Orient also said in a statement that its common stock may be transferred to the second section of both the Tokyo Stock Exchange and the Osaka Securities Exchange from the first section because the company will sink into consolidated negative net worth of 137.8 billion yen.

The company said a total of 150 million preferred shares will be issued at 1,000 yen each for the recapitalization plan.

The preferred shares will be purchased by the two core banking units of Mizuho Financial Group Inc. — Mizuho Corporate Bank and Mizuho Bank — as well as trading house Itochu Corp., Morgan Stanley Japan Securities Co. and two investment funds, it said.

Of the total capital sum Orient will raise via the third-party share allotment plan, Mizuho Financial Group will provide a combined 45 billion yen, Itochu 30 billion yen and Morgan Stanley 35 billion yen, with the two funds putting up the remaining 40 billion yen.

Separately from the new share flotation plan, Mizuho Financial Group will funnel another 140 billion yen into Orient’s capital base by converting a 140 billion yen portion of its outstanding loans to Orient into preferred shares, according to both Orient and Mizuho.

The debt equity swap will be implemented by Mizuho Corporate Bank.

Earlier this month, Orient said it would book a group net loss of 457.9 billion yen in the business year to Saturday, mainly because it set aside 148.8 billion yen in provisions to return excessive interest charges to customers. Other lenders face similar reimbursements for overcharges after the lending interest rate was capped at 20 percent.

The Mizuho group meanwhile said Wednesday it will allow Orient to implement a 10-to-1 reverse share split worth 320 billion yen. The reserve split will involve the outstanding preferred shares Orient previously sold to the group’s two core banks.

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