UFJ Bank is putting the final touches on a 120 billion yen to 130 billion yen bailout package for debt-saddled consumer finance company Aplus Co., according to sources familiar with the case.
A debt waiver of about 100 billion yen from UFJ Bank, a major creditor bank to Osaka-based Aplus, is expected to be the core of the package, the sources said Tuesday.
The bailout will also include a preferred share allocation of between 20 billion yen and 30 billion yen to UFJ Bank to boost Aplus' capital, they said.
The bailout is expected to allow Aplus, struggling under nearly 1 trillion yen in interest-bearing debts, to increase its loan-loss reserves.
The deal could indicate the path that UFJ Bank, which is under the wing of UFJ Holdings Inc., plans to take in disposing of its nonperforming loans.
It may also encourage other debt-ridden consumer credit companies to seek bailouts as well.
The aid plan would not affect the bank's earnings estimates, officials of the bank said.
Aplus reported consolidated net losses of 21.6 billion yen in the 2000 business year due to massive writeoffs of bad loans.
Due to dismal business prospects, the firm's shares, currently listed on the Osaka Securities Exchange, have recently been trading at around 100 yen.
Aplus is the latest Japanese company forced to put its finances in order by creditor banks after the government warned that the Financial Services Agency would tighten inspections of major banks heavily exposed to indebted clients.
The Aplus move also signals that major Japanese banks are under pressure to clean up nonperforming loans they extended to consumer finance companies -- most of which are burdened with debt -- along with loans to retailers and construction firms.