Shinsei Bank to waive 15.3 bil. yen in loans to Hazama

Asian Economic News, Sept 4, 2000

TOKYO, Aug. 30 Kyodo

Shinsei Bank will waive 15.3 billion yen of its 43 billion yen in outstanding loans to construction firm Hazama Corp. and then sell the remainder to the debt-ridden company's two main banks, sources close to the negotiations said Wednesday.

Terms for the sale of the loans to Dai-Ichi Kangyo Bank and Mitsubishi Trust & Banking Corp., totaling some 28 billion yen, have yet to be finalized, the sources said.

Shinsei Bank, formerly the Long-Term Credit Bank of Japan (LTCB), is estimated to have built up a loan-loss reserve of some 20 billion yen for its Hazama loans, and the sale of the 28 billion yen portion is expected to ensure it suffers no further losses.

Shinsei's decision paves the way for adoption of a final debt waiver plan for Hazama, whose other creditors, including Nippon Credit Bank (NCB), are also expected to forgive part of their outstanding loans to the contractor.

The nationalized Nippon Credit Bank, which will be sold Friday to a consortium led by Internet investor Softbank Corp., is reportedly likely to decide to write off some 5 billion yen in Hazama loans after Friday's transfer.

Shinsei Bank earlier refused to accept a debt waiver request by department store operator Sogo Co., forcing Sogo to file for court-mandated corporate rehabilitation on July 12.

Instead, the bank sold its Sogo loans to the governmental Deposit Insurance Corp. (DIC) under the terms of the contract by which Ripplewood Holdings LLC of the United States bought Shinsei Bank's predecessor, the nationalized LTCB, from state control in March.

Under the contract, Shinsei Bank is allowed to sell to the DIC any of the loans it inherited from the LTCB whose market value falls by more than 20% within three years.

The DIC initially agreed to forgive part of the loans to Sogo, but public anger over use of taxpayers' money to save a private company forced Sogo to abandon the request for debt forgiveness and file for rehabilitation under court supervision.