Japan's Yamaichi plans to halt operations Brokerage firm would be nation's biggest business failure since World War II


November 22, 1997|By BLOOMBERG NEWS

TOKYO -- Yamaichi Securities Co., Japan's fourth largest brokerage firm, plans to file with regulators to cease operations in what would be Japan's biggest business failure since World War II, according to published reports.

Yamaichi's debt rating was downgraded to junk by Moody's Investors Service yesterday, making it harder and more expensive for the firm to borrow. Securities firms borrow billions of dollars to finance their investments and they risk going out of business if they can't roll over those debts.

The company's "reduced funding availability -- in combination with an already reduced capital base -- raises questions about the firm's ability to achieve its strategic repositioning, regain lost market share and to return to profitability," Moody's said, lowering its rating to "Ba3" from "Baa3."

Yamaichi has lost money four of the past six years and is embroiled in a scandal over alleged payoffs to a gangster that could bring it heavy punishment and more losses. Standard & Poor's Corp. said it may lower Yamaichi's debt rating from "BBB-," its lowest investment-grade rating.

The company has $23.7 billion in total liabilities, Nikkei English News reported, citing the Nihon Keizai Shimbun newspaper, which reported in today's editions that the company plans to close.

Officials at Yamaichi in New York said they're trying to figure out if the company is going bankrupt, said David Sexton, vice chairman of the firm's U.S. unit. Officials at the firm in Tokyo declined to comment.

Japan Ministry of Finance officials in New York said they didn't know of the company's plans. Bank of Japan officials weren't available for comment.

Yamaichi, like the rest of Japan's brokerage firms, suffers from the bursting of the nation's 1980s asset bubble. Trading volume and share prices in Japan both fell about 60 percent since the late 1980s.

Meantime, increased competition from foreign firms such as Merrill Lynch Japan Inc. and Morgan Stanley Japan Ltd. has eaten into profits. Foreign firms, for the first time, traded more shares in October than did Japan's "Big Four" brokerages -- Nomura Securities Co., Nikko Securities Co., Daiwa Securities Co. and Yamaichi.

Earlier yesterday, Yamaichi said it can repay its debts. "It's our opinion there is no problem in continuing to pay interest and principal on long-term corporate bonds," Yamaichi said in a statement.

BTC Still, investors have been bailing out for months amid persistent speculation Yamaichi has more losses and bad loans than it admits. The firm has been seeking a bailout or merger with a foreign bank or brokerage, a source said.

Pub Date: 11/22/97

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