BizTrend: Corporate revival business heating up in Japan.

TOKYO, May 20 Kyodo

The corporate rehabilitation business is quickly heating up in Japan, with both the government and the private sector launching specialized entities for reviving ailing firms.

The high-risk, high-return business starts with purchasing firms that have gone bankrupt or are at risk of failure.

By sending officials who are well-versed in the industry concerned and arranging operating funds, the purchaser tries to turn around the company so it can obtain large stock dividends or make a profit when selling the company off to a third party.

In April, the government established the Industrial Revitalization Corp. of Japan (IRCJ), which began operations May 8.

The IRCJ will operate for five years, using 10 trillion yen in government-guaranteed funds to help rehabilitate heavily indebted but viable firms.

It is now assessing the financial conditions and rehabilitation plans presented by candidate companies and their creditor banks, and is expected to announce in June the first company it will try to turn around.

Meanwhile, Mizuho Financial Group Inc., Japan's largest banking group, announced last Wednesday it will launch ''a comprehensive corporate revival project'' by forming five subsidiaries specializing in reviving feeble corporate borrowers.

Of the five new companies, four will inherit a combined total of 4.6 trillion yen in loans to about 1,000 Japanese and foreign firms in financial trouble.

The loans will be separated from Mizuho's three major banks -- Mizuho Bank, Mizuho Corporate Bank and Mizuho Trust & Banking Co. -- into the four units, which will be set up Friday as wholly owned subsidiaries of the banks. Their business operations will start in late July.

Koichi Nakai, a spokesman at the financial group, said the main purpose of segregating the loans is ''to accelerate revitalization of the borrower firms, not to dispose of the loans.''

Mizuho will also set up Mizuho Advisory Inc. jointly with the governmental Development Bank of Japan (DBJ) and five foreign institutions in early June to advise the four units.

The advisory firm will be owned 60% by Mizuho group firms, 10% by the DBJ and 6% each by Cerberus Group, Deutsche Securities Ltd., Merrill Lynch Japan Securities Co., Morgan Stanley Japan Ltd. and UBS Consortium.

The joint venture will work to integrate corporate revival methods used at the four units, and will also adopt rejuvenation expertise possessed by the DBJ and the foreign firms, according to Mizuho.

''We intend to create a company that will have Japan's most advanced advisory functions on corporate revival,'' Nakai said.

At present, U.S. investment funds are taking center stage in corporate rejuvenation in Japan as they have purchased various Japanese assets in recent years and are aiming to expand investments in the country.

Ripplewood Holdings LLC has bought the Long-Term Credit Bank of Japan, now Shinsei Bank, Nippon Columbia Co., now Columbia Music Entertainment Inc., and Seagaia resort complex in Miyazaki Prefecture.

Ripplewood is a candidate for sponsoring the rehabilitation of Huis Ten Bosch Co., the failed operator of a Dutch theme park in Sasebo, Nagasaki Prefecture.

Lone Star Group acquired Tokyo Sowa Bank, now Tokyo Star Bank, and Cerberus Group is set to purchase a majority stake in Aozora Bank.

One estimate puts the size of Japan's corporate revival market at around 10 trillion yen, but Yoichiro Yokoyama, a DBJ official in charge of business revitalization, said it is unclear if corporate revival can be an active business in Japan as much as in the United States.

He said that Japanese companies' tendency to be ''culturally intolerant,'' namely, disliking being told what to do by outside parties when they are still in business, will be a biggest barrier to the success of the corporate revival business here.