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Struggling apartment rental firm Leopalace21 Corp. said Monday its debts exceeded assets by ¥11.8 billion as of the end of June.

The negative net worth reflected stagnant apartment occupancy rates apparently stemming from Leopalace21's shoddy construction scandal, which came to light in 2018. The company faces an urgent need to find a sponsor that will support its business reconstruction.

Leopalace21 also said it expects to report a consolidated net loss of ¥14.2 billion for April-June. The company's overall earnings results for the first quarter of fiscal 2020 are set to be released Wednesday.

The firm has introduced a voluntary retirement program to cut about 1,000 jobs and scaled back its apartment construction business as part of efforts to streamline its operations and improve its profitability.

Although Leopalace21 is believed to have enough funds to keep running its businesses for a while, observers said that it would be difficult for the company to achieve a quick turnaround and that the firm could face problems in taking out fresh bank loans if it fails to eliminate the net liabilities soon.