スライド 1

The World Bank Conference:
Corporate Restructuring : International Best Practices
March 22-24, 2004, Washington, D.C.
IRCJ
Industrial Revitalization Corporation of Japan
Restructuring Approaches Used in Japan
Professor Dr. Shinjiro Takagi
Chairman
Industrial Revitalization Commission
©2004 IRCJ．All rights Reserved
Introduction
IRCJ
1. Statutory Reorganization Proceedings
2. The Guideline Regarding Out Of Court Workout
3. Industrial Revitalization Corporation of Japan (IRCJ)
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©2004 IRCJ．All rights Reserved
1. Statutory Reorganization Proceedings
IRCJ
1922 : Composition Law
1938 : Corporate Arrangement Proceeding
Under Commercial Code (Rarely used now)
1951 : Corporate Reorganization Law
1967 : Corporate Reorganization Law reformed
1999 : Civil Rehabilitation Law (Popular)
2003 : Corporate Reorganization Reform Law (Popular)
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©2004 IRCJ．All rights Reserved
1. Statutory Reorganization Proceedings
IRCJ
 Civil Rehabilitation Proceeding
- Mainly used for small and mid sized enterprises（SMEs）
- DIP in principle
- Secured right cannot be impaired without consent of
each secured creditor
 Corporate Reorganization Proceeding
- Mainly used for bigger corporations
- Trustee (exception: Court can appoint an incumbent manager
as an trustee)
- Secured right can be changed by reorganization plan
accepted by majority resolution
- Usually 100% dilution of equity (wiping out shareholders’ rights)
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©2004 IRCJ．All rights Reserved
1. Statutory Reorganization Proceedings
IRCJ
 Japan’s unique culture
- Wide use of promissory notes
- Main bank group system
- Vestige of stigma
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©2004 IRCJ．All rights Reserved
2. The Guideline Regarding Out Of Court Workout
IRCJ
 2003
The Guideline Regarding Out of Court Workout was established
by National Bankers Association and other relevant organizations
 Workout between a debtor and financial institutions
not including trade creditors
- Filing proposed plans with a main bank by a debtor
- Notice of standstill to financial institutions
- 1st creditors’ meeting within 2 weeks after the notice
• Unanimous consent to the standstill
• Set standstill period (maximum 3 months)
• Appoint professional advisors
• Appoint creditors’ committee (optional)
• Approve DIP finances
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©2004 IRCJ．All rights Reserved
2. The Guideline Regarding Out Of Court Workout
IRCJ
 Advisors’ report regarding fairness and feasibility of the plan
 Solicitation to accept the plan
 2nd creditors’ meeting
Unanimous consents to the plan
 Contents of the plan
• DES and/or partial debts forgiveness
• Eliminate negative net worth within 3 years
• Recover profitability within 3 years
• Equity dilution
• Replacement of the managers
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©2004 IRCJ．All rights Reserved
3. Industrial Revitalization Corporation of Japan
IRCJ
 1996
- The Resolution & Collection Corporation (RCC) was established
 April 2003
- The Industrial Revitalization Corporation Of Japan (IRCJ) was
established
 The goal of the IRCJ is to reduce NPLs by half (approximately 4%)
before March, 2005, revitalizing troubled corporations at the same
time
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©2004 IRCJ．All rights Reserved
3. Industrial Revitalization Corporation of Japan : Scheme
Exit
Entry
Indebted
Company
Restructuring
Plan
Main Bank
Non-Main
Banks
Non-Main
Non-MainBanks
Banks
IRCJ
I
R
C
J
Revived
Company
Banks
New Money
Evaluation
Strategic Sponsors
Non-Main
Banks
Private Equity
Fund
Loan Assets
Purchase
Sale
Investment Banks
DES
Banks
Please refer to the brochure for the details.
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©2004 IRCJ．All rights Reserved
3. Industrial Revitalization Corporation of Japan : Feature
IRCJ
 Executives and members of the board of directors and IRCJ
Commission are under the approval of the ministers in charge.
 The IRCJ can raise money as much as 10trillion Japanese Yen
with the government guarantee to purchase loans and infuse new
money.
 The IRCJ must exit within three years after purchasing the loans.
 Total lifetime of the IRCJ is limited to five years.
 Sole shareholder is the Deposit Insurance Corporation (DIC).
 All the financial institutions in Japan are the capital contributors.
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©2004 IRCJ．All rights Reserved
3. Industrial Revitalization Corporation of Japan
IRCJ
■Other matters related to the IRCJ
 Decentralized Asset Management Corporation which are
subsidiaries of banks, were set up after the starting of the IRCJ
 Consulting Committees to revitalize SMEs were established in
every region all over Japan after the starting of the IRCJ
 Conversion to statutory reorganization proceedings
- Treatment of trade creditors (equality rule)
 Human Resources
Restructuring advisors and turnaround managers
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©2004 IRCJ．All rights Reserved
Chart 1
Balance of Non- and Poor-Performing Loans
in Banks across the Nation
Trillion Yen
40
30
20
10
0
'99/3
'01/3
'03/3
'03/9
(from the Nikkei Paper ’03/12/27)
©2004 IRCJ．All rights Reserved
Chart 2
Balance and Rate of Non- and Poor-Performing Loans among Major Banks
Trillion Yen
(%)
40
9
35
7.2%
8
7
30
6
25
20.2
5
20
4
Balance of NPL
Rate of NPL
15
3
10
2
5
1
0
0
1998
'99
2000
'01
12
'02
(from White Paper on the Economy
and Public
Finance
2003)
©2004
IRCJ．All
rights Reserved
Chart 3
Balance of Non- and Poor-Performing Loans
Trillion Yen
30
20
Majo r B an k
Re gio n al B an k
2 n d Re gio n al B an k
10
0
'02/3
'02/9
'03/3
13
'03/9
(from the Nikkei Paper ’03/12/30)
©2004 IRCJ．All rights Reserved
Chart 4
Financial Support
for Major Construction Companies in the Past
Major Banks
Major Construction
100 million Yen
Mitsui Sumitomo
Kumagai-
Mizuho Corporate
Mitsui-Sumitomo
Fujita
Asuka
Resona
Hazama
Haseko
Company
Gumi
Corporation
1997
6,400
1999
1,049
1,200
837
2000
2001
1,469
4,500
1,420
1,636
(ex-Mitsui)
2002
2003
3,000
600
3,000
(ex-Sumitomo)
～4,000
over 500
300
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Total
7,500
2,520
800
300
1,500
over 1,000
©2004 IRCJ．All rights Reserved
(from the Nikkei Sangyo Paper ’03/11/28)
4,200
7,500
2,049
5,442
IRCJ
Industrial Revitalization Corporation of Japan
Inquiries: Corporate Planning Office
+81-3-6212-6400 (Switchboard)
Home Page: www.ircj.co.jp
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©2004 IRCJ．All rights Reserved

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