Consumer Lender Takefuji to File for Bankruptcy

Tokyo, Sept. 27 (Jiji Press)--Major Japanese consumer finance firm
Takefuji Corp. <8564> is considering filing for court protection from
creditors under the Corporate Rehabilitation Law, informed sources said
Monday.
Takefuji gave up reconstruction on its own, hurt by massive
reimbursements of overcharged interest to borrowers, which surged due to
tighter regulations that call for lowering the maximum lending rate to 20
pct, the sources said.
The company will apply for the bankruptcy procedures with Tokyo
District Court, aiming to turn around its business by looking for a sponsor
and cutting such reimbursements. Its liabilities are estimated at some 400
billion yen but may be higher with the inclusion of overcharged interest
whose repayment has not been demanded by clients, the sources said.
After the Supreme Court in 2006 ruled against so-called grey zone
interest rates that topped 20 pct, clients of consumer finance firms rushed
to demand the return of overcharged interest on loans. The industry's
reimbursement costs came to 2.4 trillion yen for the three years to March
2009, cutting into earnings of such lenders.
In a court-led rehabilitation process, such interest reimbursements
are usually slashed. For example, the return of overcharged interest to
borrowers by Credia Co. was cut by 60 pct after it filed for bankruptcy in
September 2007.
Takefuji once became the industry leader through aggressive
advertisements, logging group operating revenue of 425.4 billion yen in the
year ended in March 2002. Its outstanding lending peaked at 1,766.6 billion
yen.
But Takefuji has stopped new lending since late last year and has
raised necessary funds by selling real estate and loan claims.
The full enforcement of Japan's revised money lending business law
in June, which slashed the amount of loans an individual can take out from
lenders to only one-third of his or her annual income, dealt a heavy blow to
the company.
For the year ended in March, Takefuji reported group operating
revenue of 120.2 billion yen and a net profit of 4,577 million yen. Overall
assets as of the end of June stood at 559.2 billion yen.
Last year, Aiful Corp. <8515>, another independent consumer finance
firm with no capital affiliation with a major bank, filed for business
reconstruction under an out-of-court rehabilitation process called
alternative dispute resolution.
END