Nomura Holdings Inc., the nation’s largest brokerage, plans to revise its corporate bylaws to allow the issuance of preferred shares as it seeks to secure additional funds amid a further deterioration in market conditions, sources said Thursday.
The revision is expected to be endorsed at a general shareholders’ meeting in June, the sources said. It will become the first case of a major Japanese securities house issuing preferred shares.
Preferred shares are attached with a fixed dividend that will take priority over common shares, but do not carry voting rights that can be exercised at general shareholders’ meetings. Major Japanese banks and corporations have opted to issue preferred shares as a relatively quick solution to boost funds.
Based on its current articles of incorporation, Nomura is unable to issue classified stocks, including preferred shares, and can only bolster its financial base by issuing common shares, which carry the risk of diluting the value of existing shareholdings.
Nomura, which acquired parts of failed U.S. investment bank Lehman Brothers Holdings Inc., has just raised about ¥300 billion by issuing new common shares earlier this month.
Although Nomura believes its latest fundraising measure, worth ¥300 billion, is sufficient for the time being, it wants to be ready to strengthen its financial standing in anticipation of further investments that will be necessary to expand its businesses through the Lehman acquisitions, the sources said.
The issuance of preferred shares is unlikely to draw the ire of the company’s shareholders since it will help to raise Nomura’s core equity capital without diluting value, they added.
Crippled by the fallout from the global financial turmoil, Nomura fell into the red with a group net loss of nearly ¥500 billion for the April-December period and is likely to stay in the red for a second consecutive year in the current business year that ends March 31.
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