<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Japan lender bankrupt with debts of $5.5b
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SFCG president Kenshin Oshima (left) and company executives bow their heads after announcing the firm had filed for bankruptcy at a press conference in Tokyo. -- PHOTO: AGENCE FRANCE-PRESSE
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->TOKYO: Japan's SFCG, a lender to smaller companies, failed yesterday as tightening credit hits businesses throughout the economy, and shares of other non-bank lenders plunged on fears they may face more problems ahead.
The failure of SFCG, with debts amounting to 338 billion yen (S$5.5 billion) - Japan's biggest bankruptcy filing in debt terms this year - would likely ripple through the stock market as it would make financing even more difficult for small and medium firms, an analyst said.
'SFCG's failure might become the first stage of a second round of the financial crisis,' said Mr Norihito Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities.
Japanese firms are slashing jobs to survive as the economy looks set for its longest recession in modern times. A record 33 listed companies went under in Japan last year, most of them crippled as banks tightened their lending policies.
The collapse of SFCG, whose creditors include Citibank and Shinsei Trust & Banking, a unit of Shinsei Bank, may point to a higher default risk among second-tier non-banks as they face difficulties collecting loans from real estate and smaller firms, said Daiwa SMBC credit analyst Takao Matsuzaka.
Shares in consumer finance firm Aiful Corp led the decline, sliding 20.3 per cent to the lowest level since the issue was listed in 1997.
Rival Takefuji Corp tumbled 15.2 per cent, and the sub-index of Japanese non-bank lenders plunged to the lowest in more than two decades. Among real estate firms, Daikyo Inc lost 12 per cent.
SFCG filed for court protection under bankruptcy law with 338 billion yen in debt, saying it had mounting irrecoverable losses from property-backed loans to small and mid-sized companies, due to rising bankruptcies, sinking property prices and weak demand for new loans.
The lender, which had borrowed heavily from foreign banks, including Lehman Brothers, said it failed to secure 7.5 billion yen needed for its February settlement.
'The move shows that there is extremely severe credit tightening happening in Japan,' Mr Fujito said. 'We'll need to watch small Reits (real estate investment trusts) and real estate companies' businesses as many of them are SFCG borrowers. The business outlook for non-bank firms is also a concern.'
SFCG is the 10th listed Japanese company to fail this year.
On Monday, seven other non-listed companies, including a restaurant operator, Kanda Seiyoken, stopped operations prior to bankruptcy filings, research firm Teikoku Databank said. REUTERS
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SFCG president Kenshin Oshima (left) and company executives bow their heads after announcing the firm had filed for bankruptcy at a press conference in Tokyo. -- PHOTO: AGENCE FRANCE-PRESSE
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->TOKYO: Japan's SFCG, a lender to smaller companies, failed yesterday as tightening credit hits businesses throughout the economy, and shares of other non-bank lenders plunged on fears they may face more problems ahead.
The failure of SFCG, with debts amounting to 338 billion yen (S$5.5 billion) - Japan's biggest bankruptcy filing in debt terms this year - would likely ripple through the stock market as it would make financing even more difficult for small and medium firms, an analyst said.
'SFCG's failure might become the first stage of a second round of the financial crisis,' said Mr Norihito Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities.
Japanese firms are slashing jobs to survive as the economy looks set for its longest recession in modern times. A record 33 listed companies went under in Japan last year, most of them crippled as banks tightened their lending policies.
The collapse of SFCG, whose creditors include Citibank and Shinsei Trust & Banking, a unit of Shinsei Bank, may point to a higher default risk among second-tier non-banks as they face difficulties collecting loans from real estate and smaller firms, said Daiwa SMBC credit analyst Takao Matsuzaka.
Shares in consumer finance firm Aiful Corp led the decline, sliding 20.3 per cent to the lowest level since the issue was listed in 1997.
Rival Takefuji Corp tumbled 15.2 per cent, and the sub-index of Japanese non-bank lenders plunged to the lowest in more than two decades. Among real estate firms, Daikyo Inc lost 12 per cent.
SFCG filed for court protection under bankruptcy law with 338 billion yen in debt, saying it had mounting irrecoverable losses from property-backed loans to small and mid-sized companies, due to rising bankruptcies, sinking property prices and weak demand for new loans.
The lender, which had borrowed heavily from foreign banks, including Lehman Brothers, said it failed to secure 7.5 billion yen needed for its February settlement.
'The move shows that there is extremely severe credit tightening happening in Japan,' Mr Fujito said. 'We'll need to watch small Reits (real estate investment trusts) and real estate companies' businesses as many of them are SFCG borrowers. The business outlook for non-bank firms is also a concern.'
SFCG is the 10th listed Japanese company to fail this year.
On Monday, seven other non-listed companies, including a restaurant operator, Kanda Seiyoken, stopped operations prior to bankruptcy filings, research firm Teikoku Databank said. REUTERS
