Business / Corporate

Japan's Chiyoda Corp. reportedly to get ¥150 billion bailout from Mitsubishi and MUFG Bank

JIJI, Kyodo

Embattled plant engineering firm Chiyoda Corp. is expected to receive financial aid valued at up to about ¥150 billion from its top shareholder, Mitsubishi Corp., together with MUFG Bank, it was learned Tuesday.

The aid will potentially include loans and a capital increase through third-party allotment of preferred shares, according to sources.

Chiyoda plans to accelerate efforts to improve its financial standing after losses from a liquefied natural gas plant project in Louisiana forced the company to lower its consolidated net loss estimate for fiscal 2018, which ended in March, to over ¥200 billion.

The LNG plant losses came after the company faced difficulties securing workers for the project as workers were hard to find during a rebuilding boom following a hurricane.

A large portion of the aid will be provided through the issuance of preferred shares without voting rights to Mitsubishi, which owns an equity stake of more than 30 percent in Chiyoda, the sources said.

Chiyoda is expected to remain listed on the Tokyo Stock Exchange.

Chiyoda said Tuesday its group net loss for the year ended in March is projected to have doubled to ¥215 billion from its earlier forecast, prompting it to seek financial support.

The company had projected a fiscal 2018 group net loss of ¥105 billion last October. Chiyoda attributed the downward revision to additional costs for the LNG project in Louisiana.

It also expects its group operating loss to have expanded to ¥200 billion, from an earlier projected ¥86.5 billion, on revenues of ¥340 billion, down from an earlier forecast of ¥400 billion.

The firm was scheduled to announce its fiscal 2018 earnings Thursday.

A Mitsubishi official declined to comment on the details “because the matter is under discussion.”

The trading firm has helped the engineering company when it faced difficulties in the past, saying it believes Chiyoda has technological prowess in building LNG plants.

Chiyoda had said it would compile a restructuring plan by the end of March but postponed the release, saying it was “continuing talks with the main stakeholders and are in the stage of making arrangements.”