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Japan lender files for bankruptcy Japan lender files for bankruptcy
(about 2 hours later)
Japanese lender SFCG has filed for bankruptcy protection, with 338bn yen ($3.6bn; £2.31bn) in debts.Japanese lender SFCG has filed for bankruptcy protection, with 338bn yen ($3.6bn; £2.31bn) in debts.
It is the largest publicly traded Japanese firm to seek bankruptcy protection in close to seven years.It is the largest publicly traded Japanese firm to seek bankruptcy protection in close to seven years.
The firm focuses on lending to small businesses, but its failure could mean an increased tightening of credit across the Japanese economy.The firm focuses on lending to small businesses, but its failure could mean an increased tightening of credit across the Japanese economy.
SFCG, whose creditors include Citigroup, is the 10th listed Japanese company to fail this year.SFCG, whose creditors include Citigroup, is the 10th listed Japanese company to fail this year.
The firm, which had borrowed from foreign banks including Lehman Brothers, suffered from unrecoverable losses brought about by property-backed loans to small and mid-sized firms.
This secured-loans business has been hit by rising bankruptcies, dropping property prices and weak demand for new loans.
'Second round''Second round'
It comes after data released by Tokyo Shoko Research in January showed bankruptcies at market listed companies hit a record high of 35 for the year to 31 March 2008, the highest since World War II. Its collapse comes after data released by Tokyo Shoko Research in January showed bankruptcies at market listed companies hit a record high of 35 for the year to 31 March 2008, the highest since World War II.
In total, corporate bankruptcies rose 15.8% to 1,360 cases in January, the eighth monthly increase.
SFCG facts Started in December 1978Has 1,5000 employeesAlso operates property and insurance firmsHas 109 branches in Japan
Most of those firms went under after banks had tightened their lending policies, and it is feared SFCG's demise could lead to a new round of tightening.Most of those firms went under after banks had tightened their lending policies, and it is feared SFCG's demise could lead to a new round of tightening.
"SFCG's failure might become the first stage of a second round of the financial crisis," said Norihito Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities."SFCG's failure might become the first stage of a second round of the financial crisis," said Norihito Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities.
SFCG had borrowed from foreign banks including Lehman Brothers, but suffered from unrecoverable losses from property-backed loans to small and mid-sized companies. Its founder Kenshin Oshima, 60, was listed in 23 place of a Forbes magazine list of Japan's richest people in 2007.
'Severe reality'
The failure hit financial firms on the Japanese stock index, the Nikkei, which ended the day down 0.5%.
Shares in consumer finance firm Aiful tumbled 20.3% to their lowest level since being listed in 1997, while its rival Takefuji fell 15.2%.
Meanwhile the sub-index of Japanese non-bank lenders fell to its lowest in more than two decades.
Shares in SFCG have fallen 92% in the past year, and according to the Japanese stock exchange website are set to be delisted late in March.
"The bankruptcy filing highlighted a severe reality that Japanese small to mid-sized companies face," said Kenichi Hirano, operating officer at Tachibana Securities.