To all:
Copied the following from AOL: Looking at the sixth paragraph, at least someone doesn't think it is serious. Yeah, we'll see.
c Kyodo News Service
TOKYO, Nov. 22 (Kyodo) - Yamaichi Securities Co., one of Japan's ''Big Four'' brokerages and now mired in a financial crisis, has given up a plan to rehabilitate itself and decided to file for a voluntary shutdown, industry sources said Saturday.
The downfall of Tokyo-based Yamaichi would leave behind an estimated 3 trillion yen in unresolved debts, making it the largest corporate insolvency in the nation's history, the sources said.
After the news jolted Japan's financial sector early morning, Yamaichi has continuously convened an extraordinary board meeting and decided to formalize by next Monday a plan to end its 100 years of operations, the sources said.
Yamaichi has been overshadowed by a short-term liquidity crunch and a weakening capital base.
Speaking at an emergency news conference, Atsushi Nagano, director general of the Finance Ministry's Securities Bureau, said Yamaichi is projected to have more than 200 billion yen in unlisted hidden debts.
But he said the situation is ''not a serious one'' where Yamaichi's clients or business partners would incur losses, because the brokerage has no capital deficit, with about 430 billion yen in its capital account.
The Bank of Japan (BOJ) will extend an unlimited amount of special unsecured loans to Yamaichi, in accordance with Article 25 of the BOJ Law, to safeguard clients' property totaling about 24 trillion yen, according to the industry sources.
Yamaichi's image was seriously tarnished by a high-profile financial scandal in Japan earlier this year involving payoffs to a ''sokaiya'' corporate racketeer.
Market confidence in Yamaichi has also taken a drubbing on persistent stock market rumors that the company is engaging in improper ''tobashi'' trading activities.
Tobashi is a practice in which brokerages transfer shares with latent losses incurred by one favored client to another in an effort to keep the client from reporting the loss on its balance sheet, under the understanding that the shares will be repurchased by the brokerages.
The brokerage has been strapped for cash in the money market since the recent downturn in its stock price following the failures of two other major financial institutions earlier this month.
Sanyo Securities Co., a second-tier brokerage, went bust Nov. 3, followed by the bankruptcy Monday of Hokkaido Takushoku Bank, one of Japan's top 10 nationwide full-service commercial banks.
Yamaichi started considering dissolving itself after Moody's Investors Service downgraded its senior debt to junk-bond status in two stages Friday.
After reducing the rating to Ba3 from Baa3, the U.S. rating agency then lowered it to Caa1 and said the rating remains under review for possible further downgrading.
Moody's said the action was prompted by further erosion in market confidence resulting from allegations of illegal payments by the firm and from uncertainties over the availability of institutional support.
''This erosion of confidence exacerbates Yamaichi's already weakened financial fundamentals,'' the agency said.
BOJ Executive Director Tadayo Homma said Saturday the BOJ ''will take the necessary steps to help stabilize financial markets, both at home and abroad,'' hinting that it would provide Yamaichi with special unsecured loans.
Yamaichi is likely to negotiate a liquidation scheme for voluntary closure with the Finance Ministry, the central bank and major commercial banks, the industry sources said.
Under a voluntary closure arrangement, a securities company is required to repay cash and securities to its customers and liquidate its assets before shutting itself down.
Yamaichi is also mulling a possible reorganization under the Corporate Rehabilitation Law, as well as a temporary suspension of business activities, and the transfer of its business to a foreign securities company, the sources said.
The brokerage had attempted to nurse itself back to health with a radical restructuring program that called for cutting back overseas operations and personnel.
It also sounded out Fuji Bank, its main creditor bank, for a possible capital infusion and has sought a tie-up with major European and U.S. securities houses.
Founded in 1897, Yamaichi is the brokerage with the longest history among the nation's four biggest securities firms that also include Nomura Securities Co., Daiwa Securities Co. and Nikko Securities Co.
Yamaichi, hit hard by a recession in 1965, became the beneficiary of special unsecured loans totaling 28.2 billion yen from the BOJ.
Thereafter, the company developed into one of the four largest brokerage houses and became known for its strong trade with corporate clients.
In fiscal 1990, toward the end of the so-called ''bubble'' economy, Yamaichi posted a record 233.6 billion yen in unconsolidated pretax profit.
Its earnings faltered with the collapse of the asset-inflated bubble economy in the early 1990s. In fiscal 1996 ended in March, it managed to post an unconsolidated pretax profit of 1.22 billion yen but incurred a net loss of 16.48 billion yen.
For the first half of fiscal 1997, it reported a pretax loss of 2.74 billion yen and a net loss of 5.99 billion yen, or 4.95 yen per share, on operating revenues of 99.36 billion yen. It was the only brokerage among the top four to have registered a pretax loss for the April-September period.
The losses stemmed in part from a decline in commission income as an increasing number of customers shunned the firm after it became known that Yamaichi was being investigated for allegedly paying off a corporate racketeer.
Yamaichi has about 7,500 employees and 117 outlets in Japan, and 33 subsidiaries, branches and representative offices abroad.
Its stock dropped to 58 yen Wednesday from around 500 yen earlier this year. It closed at 102 yen Friday, up 22 yen from Thursday.
AP-NY-11-22-97 0728EST
|
