Daiei gets bailout raised to $3.9 billion

Associated Press

TOKYO — Japan's Daiei Inc. got a $3.9 billion lifeline from its banks yesterday in a revival plan seen as a test case for Japan's efforts to turn around its struggling businesses.

The debt-ridden retailer said the credit line — increased by $746 million from its last restructuring plan a month ago — would keep it afloat.

Daiei sought the increased credit line in return for a more aggressive plan to sell off properties, slash its work force and shutter money-losing stores, said Kunio Takagi, president of Daiei.

Daiei announced its original three-year bailout package on Jan. 18, but the market reacted coolly. That reportedly prompted the government to ask the banks to work out a more drastic plan.

Under the new plan, Daiei's biggest creditors — UFJ Holdings, Sumitomo Mitsui Banking Corp. and Mizuho Holdings' Fuji Bank — agreed to swap 230 billion yen ($1.72 billion) of debt for equity and waive another 170 billion yen ($1.23 billion) in debt.

The three banks agreed to surrender 120 million yen ($895 million) in preferred shares they bought in exchange for a capital infusion last year.

Daiei's revival efforts are being closely watched for signs that corporate Japan is taking the painful measures necessary to restore growth. The company owes 1.6 trillion yen ($11.9 billion) to its three main banks and employs about 100,000 people.

Takagi said Daiei hopes to reduce its debts to 900 billion yen ($6.7 billion) by February 2005 by selling hotels, restaurants and other non-core businesses.

He said Daiei plans to trim its supermarket-chain work force by 1,400 jobs, or 12 percent, reduce its 169 subsidiaries to 100 and close 60 of its 320 stores in three years. Daiei Hawaii officials said earlier this month that the retailer's Kobe-based parent remains committed to keeping the four Hawai'i locations open.