Struggling contractor Kumagai Gumi Co. said Thursday that it will issue new shares worth 20 billion yen to 13 financial institutions and one of its affiliates to help replenish its depleted capital base.

The 13 financial institutions include Sumitomo Bank, Sumitomo Trust & Banking Co., Tokai Bank, Chuo Mitsui Trust & Banking Co. and four regional banks -- Gunma Bank, Hokuriku Bank, Fukui Bank and Hokkoku Bank.

The shares will be floated at 61 yen per share, with payment due on March 29.

Of the 20 billion yen it expects to raise, Kumagai Gumi plans to funnel 16.4 billion yen into capital accounts that have suffered under its disposal of nonperforming assets, it said. As a result of the capital infusion, depleted shareholders' equity will balloon to 33.4 billion yen, it said.

Kumagai Gumi said it will use proceeds from the new share offering to help repay its outstanding loans to creditor banks.

The four regional banks subscribing to the new issues will each own 4.5 percent of the construction firm.

On March 1, the firm, swamped by bad assets and huge interest-bearing liabilities, cut its capital by 65 billion yen to 17 billion yen in an attempt to rebuild.

The capital reduction was part of a major restructuring plan it agreed to in December with its 15 creditor banks, under which the banks agreed to forgive 430 billion yen in loans.

Capital reductions are often carried out as a means to compensate losses incurred by a company. Under the scheme, shareholders agree to forgo part of their ownership in the company so that the firm can use their money to pay its debts.