UPDATE 2-Tomen seeks aid from UFJ, gets Toyota funds


(Recasts, adds president comments)

By Nathan Layne

TOKYO, Dec 27 (Reuters) - Debt-ridden trading house Tomen Corp said on Friday it has asked its main banks for 170 billion yen ($1.42 billion) in financial aid while securing help from Toyota Motor Corp to revive its flagging fortunes.

Tomen said the Toyota group will buy 10 billion yen worth of new shares in the mid-sized trading firm next summer, and unveiled plans to merge with Toyota Tsusho Corp , another trading house affiliate of Japan's top automaker.

It said no specific date has been set for the merger with Toyota Tsusho, which owns 11.5 percent of Tomen.

The bailout of Tomen is the latest in a recent series of restructuring steps among struggling firms as the government steps up pressure on banks to clean up their pile of bad loans.

It also shows a commitment on the part of the Toyota group to help revive Tomen, which is projecting a group net loss of 52 billion yen for the current business year.

"We are planning to have a number of people come to our company from Toyota and give us guidance," Tomen President Morihiko Tashiro told a news conference. "In turn, we hope we can be of assistance to Toyota in its ventures around the globe."

The government's efforts to accelerate bad-loan disposal have increased the pressure on ailing businesses, and earlier this month trading firms Nissho Iwai Corp and Nichimen Corp were pushed into the industry's first merger since 1977.

UFJ Holdings Inc and other banks would forgive debt of about 110 billion yen and buy preferred shares worth 60 billion yen as part of the plan, Tomen said.

A spokesman at UFJ Bank, a core member of UFJ Holdings, said the bank would positively consider Tomen's aid request as the bank favourably assessed the firm's restructuring plan.

"We have asked our banks for help and are confident that UFJ and others will agree to our request," Tashiro said.

In exchange for the financial aid, Tomen said it will slash its group's headcount of 9,186 workers by 4,000 by March 2006, cut costs by 12 billion yen and reduce interest-bearing debt by 60 percent to 463 billion yen in the same period.

More than half of the job cuts will come from overseas operations, with particular focus placed on restructuring in Southeast Asia, the trading firm said.

Tomen also plans to pull out of its real estate business.


Tashiro said Tomen is not discussing asking the Toyota group for additional capital assistance in the future.

Rating agency Standard & Poor's said on Friday that Toyota's debt rating was unlikely to be negatively affected by a probable extension of support to Tomen, and brokerage analysts echoed that there was little need for concern.

"As long as Tomen isn't consolidated on Toyota's books, there will really be no effect on Toyota's financial standing," said Tsuyoshi Mochimaru, auto analyst at Daiwa Institute of Research.

Based on Tomen's current stock price, the Toyota group's stake in Tomen would jump from 17 percent to just above 30 percent. The acquisition price has not been determined.

This is not the first time Tomen has been bailed out.

Tomen got a 219 billion yen debt waiver in 2000 from Tokai Bank, which eventually became part of UFJ Bank, and set out on a three-year revival plan that ends in March 2003.

Tashiro will step down in June next year to take responsibility for not turning the company around.

"You could say that we misjudged the economy and the outlook for the stock market, but we also were ahead in our restructuring on many fronts, including debt reduction," Tashiro said.

"We certainly didn't think the Nikkei average would go from 20,000 to below 10,000 to around 8,000 now."

Tomen said it will reduce capital by 3.2 billion yen while tapping 15.4 billion yen from its reserves to clean up its accumulated losses.

Earlier on Friday, Tomen said it would post a group net loss of 51.6 billion yen for the year to March 2003, a sharp downward revision from its earlier forecast for a profit of 11.5 billion, to reflect special losses related to the new plan.

Tomen shares ended the session down 5.19 percent at 73 yen following the announcement. Toyota rose 0.63 percent to 3,170 yen. The Nikkei average gained 0.16 percent. ($1=119.92 yen)



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