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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' |
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. |
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. |