Court rejects Sumikura Industrial's bankruptcy application.

TOKYO, May 17 Kyodo

The Tokyo District Court has rejected a bankruptcy application by Sumikura Industrial Co. and has taken steps for the company to restructure itself under the civil corporate revival law, the court and officials related to the case said Friday.

Tokyo-based Sumikura Industrial, a major metalworking machinery manufacturer, filed for bankruptcy May 10 on grounds that a drop in public trust made it unable to continue operations.

President Hisaki Aoki maintained that the company had lost public faith and was unable to continue following the arrest of its former President Hajime Oshima on suspicion of paying off ''sokaiya'' corporate blackmailers.

However, shareholders later asked the court to reject the bankruptcy application, saying it was possible for the company to restructure itself.

Sumikura is listed on the second sections of both the Tokyo Stock Exchange and the Osaka Securities Exchange, but the two bourses have decided to delist it on Aug. 11.

Set up in 1952, Sumikura's performance worsened after the burst of the 1980s bubble economy forced many companies to cut back on capital investment, leading to fewer orders for its metalworking machinery.

In 2000, the company procured funds by issuing new shares and convertible bonds, but the use of the funds was viewed as shady, and ultimately led to the arrest of Oshima.