Japan agency to help in bailing out Daiei

By Tim Kelly and Yasue Aoi
Bloomberg News Service

TOKYO — Daiei Inc., a Japanese retailer with about $13.5 billion in debt, will be bailed out by the government only two weeks after a new banking regulator said no company was too big to fail.

The Development Bank of Japan, financed by public pensions and postal savings, said it will contribute a sixth of a $480 million fund for Japan's third-largest retailer. Daiei's major lenders, UFJ Holdings Inc., Mizuho Holdings Inc. and Sumitomo Mitsui Banking Corp. will provide the rest.

Development Bank's participation in Daiei's second bailout this year suggests the state may become the lender of last resort to companies cut off by private banks. It indicates big companies such as Daiei, which employs 96,000 workers, may be exempt from a drive to mop up $421 billion in bad loans.

"It's bad enough that the government has been supporting banks with their poor management. But now they are selectively bailing out nonfinancial companies," said Alex Muromcew, who helps to manage $600 million in stocks globally for Loomis Sayles & Co. in San Francisco and doesn't hold Daiei shares. "Where does the government stop and who gets the next bailout?"

The governor of the Development Bank of Japan, Takeshi Komura, said the bank is in talks with other Japanese companies and may invest in similar funds. "If it's a benefit to the Japanese economy then we will consider other funds," he said.

The retailer amassed its debt in the late 1980s and early 1990s to buy real estate that has since lost as much as 70 percent of its value. In March, it won a debt waiver worth a combined $4.16 billion from its main banks.