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TOKYO - SFCG Co, a major provider of high-interest loans to small businesses, filed for bankruptcy protection on Monday - the latest Japanese company to fold under the growing weight of recession and financial distress.
The Tokyo-based moneylender, which borrowed from several foreign banks including Citigroup Inc and the former Lehman Brothers Inc, listed 338 billion yen ($5.5 billion) in liabilities in its filing with the Tokyo District Court. It said it could no longer stay afloat amid mounting bad loans, tighter credit conditions and new regulations limiting interest rates in the consumer lending industry. 'Unfortunately, we are at a point where we can no longer turn the situation around on our own,' the company said in a statement. 'We hope to become solvent again as soon as possible under civil rehabilitation proceedings.' The news underscored that more corporate bankruptcies may follow amid Japan's deepening recession. Major bankruptcies last year came mainly from real estate and construction companies, but SFCG's failure signals that more sectors could be at risk in the months ahead. SFCG is the biggest Japanese company to fail this year and becomes the 10th listed company to file for bankruptcy since Jan 1, according to corporate credit research firm Teikoku Databank. Last year, 34 listed firms failed - the most since the end of World War II, Teikoku Databank said. Financial shares came under heavy selling pressure on Monday on the news, though it 'didn't affect the overall market too much because it's something investors had been expecting', said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. Shares of SFCG's major Japanese creditors, including Shinsei Bank Ltd and Orix Corp, and other consumer lenders were hammered. Shinsei declined 7.6 per cent to 85 yen, and Orix shed 13.5 per cent to 2,060 yen. Takefuji Corp, Japan's biggest consumer finance company, plunged 15.9 per cent to 393 yen. The Tokyo Stock Exchange said it will delist SFCG from its 'First Section' of biggest companies on March 24. The issue tumbled 15.5 per cent to 1,092 on a deluge of sell orders. It has plunged 86 per cent since Lehman Brothers filed for Chapter 11 last September. Established in 1978, SFCG posted 15.9 billion yen net loss in the August-October quarter, down from a 3.6 billion profit the previous year. -- AP
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