Posted on: Tuesday, May 21, 2002

Daiei urged to accelerate restructuring plan

By Miki Anzai and Noriko Tsutsumi
Bloomberg News Service

KOBE, Japan — Daiei Inc., which this year secured a $4.1 billion bailout to avert financial collapse, should speed up its plans to close stores and subsidiaries, the head of the government's advisory panel on debt-ridden companies said.

"We urged Daiei to map out more concrete plans to close money-losing stores and affiliates," said Shinjiro Takagi, chairman of a government panel that in September issued guidelines for indebted companies looking to restructure themselves without filing for bankruptcy protection.

Japan's third-largest retailer in March asked Takagi to help evaluate a three-year restructuring plan that it put together the previous month.

The Kobe-based retailer said it plans to cut 7,000 jobs from its work force of 35,000, shut 100 unprofitable stores and cut the number of companies in its group to 100 from 148 in the next three years, in return for a $4.1 billion debt relief package from its main lenders — Mizuho Holdings Inc., Sumitomo Mitsui Banking Corp. and UFJ Holdings Inc.

"We found that Daiei's three-year restructuring is basically feasible," Takagi said at a news conference.

Daiei forecasts net income of $9.53 million in the year ending next February, compared to the $2.64 billion net loss it posted in its last fiscal year.

To revive the company, Takagi said Daiei founder Isao Nakauchi and his family members should turn over their stakes in the retailer and its units. This includes the 8.7 percent of the parent that Nakauchi, 79, owns through his private investment companies, as well as the 40 percent of the Fukuoka Daiei Hawks baseball team that his son, Tadashi, owns.

Daiei accumulated debt in the 1980s and 1990s, when Nakauchi expanded the company's business to include a shopping center in Honolulu and hotels on Japan's southern island of Kyushu.

"This company should free itself from the past," Takagi said.

Daiei's shares have risen 30 percent this year, largely on optimism that the debt relief will keep the retailer afloat. The stock rose about 8 cents or 1 percent, to 79 cents yesterday.