Q+A-Japan corporate rehab body opens with $18 bln on tap

Fri Oct 16, 2009 5:54am EDT

TOKYO, Oct 16 (Reuters) - A Japanese government-backed institution tasked with revitalising struggling companies opened for business on Friday with the ability to tap up to 1.6 trillion yen ($18 billion) in funds.

The organisation, the Enterprise Turnaround Initiative Corporation of Japan (ETIC), will invest in and buy debt of companies with strained balance sheets and dispatch turnaround specialists to assist them in restructuring.

Following are questions and answers about the new institution:

HOW WILL IT BE FUNDED?

The ETIC was established with the mission of revitalising firms seen as key to the health of local economies. It will start with 20 billion yen in capital, half provided by the government and half from more than 100 private financial institutions.

The ETIC will operate like an investment fund and will initially have the ability to procure up to 1.6 trillion yen in state-guaranteed funding in the current fiscal year to March 2010. Its mandate runs for 5 years.

HOW WILL THE SCHEME WORK?

Companies will apply to the ETIC for assistance. If it decides to provide support it will first decide to purchase debt and then potentially make an equity investment.

It will dispatch turnaround specialists to help companies restructure and boost their corporate value. It will aim to make an exit from its investment within three years.

The ETIC scheme is similar to that of the Industrial Revitalisation Corp of Japan (IRCJ), a state-backed entity that restructured textile and cosmetics maker Kanebo Ltd and retailing giant Daiei Inc and other businesses before disbanding in 2007.

Hiroshige Nishizawa, former head of Tokyo Tomin Bank and board member of the Industrial Bank of Japan, is president of the ETIC. It plans to have a staff of 80 by the end of the year, including 40 turnaround specialists.

WHAT TYPES OF COMPANIES WILL IT TARGET? HOW ABOUT JAL?

The ETIC says its doors are open to companies of all sizes -- from small and medium-sized businesses to large corporations.

It will support companies it determines have the potential for revitalisation because they possess strong technology, brand power or a solid business model but are having difficulty due to the burden of too much debt.

In theory it could also assist companies that have filed for court protection from creditors, an ETIC official said, citing as an example the IRCJ's work in helping rescue home electrical appliance retailer Matsuya Denki.

Local media have reported that Japan Airlines Corp (JAL) (9205.T: Quote, Profile, Research, Stock Buzz), which is working with a government-appointed task force to come up with a revival plan that could hinge on debt forgiveness from its creditors, could turn to the ETIC.

Nishizawa told a news conference on Friday that the ETIC would in theory be open to a company like JAL but that the airline had not contacted the ETIC for help. (Editing by Chris Gallagher)