Consumer lender Takefuji to seek court-backed rehabilitation+

TOKYO, Sept. 27 Kyodo -
Consumer loan company Takefuji Corp. has decided to seek court-backed
rehabilitation in the face of mounting claims by borrowers for reimbursement of
excessive interest charges and thinning profit margins under tightened consumer
loan regulations, sources familiar with the move said Monday.
Takefuji is likely to go to the Tokyo District Court within a day or two, the
sources said.
Earlier in the day, the company issued a statement saying it has been
''studying and implementing a variety of measures to rebuild its business.''
The sources said Takefuji will opt for a rehabilitation process that will allow
certain members of its management team to stay on board for faster
reconstruction, although company President Akira Kiyokawa and Executive Vice
President Taketeru Takei, a member of the founding family, will resign.
Takefuji will also need to drastically reduce its network of 540 outlets,
including unmanned operations, and some 2,000 employees, they said.
Takefuji has debts totaling 430 billion yen, according to credit research firm
Tokyo Shoko Research. The amount is estimated to expand sharply if unclaimed
interest reimbursements to more than 2 million borrowers were to be added.
As of the end of March, Takefuji was the fourth-biggest consumer lender with
589.4 billion yen in outstanding loans, down from 1.77 trillion yen at the end
of March 2002 when it was the country's biggest such lender.
Takefuji has faced difficulty raising funds after its credit ratings were cut
in the wake of growing interest claims. It had been securing working capital by
selling property and other assets.
Takefuji had been trying to turn itself around on its own but has decided to
file with the Tokyo District Court to seek restructuring under the Corporate
Rehabilitation Law, the sources said. It will look for sponsors with the help
of the court, they said.
If Takefuji takes the court-aided action, borrowers expecting interest payment
reimbursements may see refunds reduced in line with cuts in the company's
repayment obligations such as corporate debts and bank borrowings, subject to
its financial standing.
While such a move would reduce Takefuji's financial burden, it could draw fire
from consumer borrowers seeking reimbursements.
The Tokyo Stock Exchange suspended trading in Takefuji shares, listed on its
First Section, until 2:50 p.m. Monday in order to confirm the media reports.
While trading was resumed in the last nine minutes until 3 p.m., Takefuji stock
went unquoted under strong selling pressure. The TSE has placed the stock as a
monitoring issue to remind investors of its possible delisting.
Other major consumer loan firms also saw their stocks fall sharply on the Tokyo
bourse, with Aiful Corp. temporarily hitting a year-to-date low of 88 yen.
The consumer lending business has faced difficulties since an increasing number
of consumer borrowers began claiming refunds of excessive interest charges
following a Supreme Court ruling in January in 2006.
The ruling invalidated any ''gray area'' interest charges beyond the interest
rate restriction law even if they were levied with the consent of the borrower
in line with old provisions of another law on investment deposit and interest
rate. It has prompted many borrowers to claim ''gray-area'' interest.
The money lending business law, revised in 2006, also hurt the industry as it
has tightened lending conditions. For example, a limit has been imposed on the
amount of loans a consumer may borrow to one-third of their annual income.
Lenders including SFCG Co. and Lopro Corp. have collapsed, while Aiful has also
been trying to revive itself under the so-called ''alternative dispute
resolution'' procedure.
==Kyodo
2010-09-27 23:38:50


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