Daikyo formally announces restructuring plan.

TOKYO, May 15 Kyodo

(EDS: RECASTING THROUGHOUT WITH THE FIRM'S FORMAL ANNOUNCEMENT)

Daikyo Inc. announced its new five-year restructuring plan Wednesday featuring 470 billion yen in financial bailout from UFJ  Bank and three other major creditor banks.

The restructuring plan also includes a spin-off of its unprofitable real estate business to enable it to concentrate its resources on the mainstay condominium business.

The restructuring plan covers a period from April this year to March 2007 and is designed to cut off the loss-making real estate business, Japan's largest condominium developer said.

About 730 billion yen, or more than 60% of the group's interest-bearing debts of over 1 trillion yen, are held in this segment of the business.

To realize the restructuring plan, four major creditor banks of the group -- UFJ Bank, Mizuho Corporate Bank, Asahi Bank and UFJ Trust Bank -- have given basic consent to providing combined debt waivers of about 410 billion yen, Daikyo said.

The banks have also agreed to provide 60 billion yen through debt-for-equity swap deals under which they buy preferred shares  Daikyo will issue.

In all, the bailout package by the banks totals 470 billion yen.

For its part, the company will cut the parent firm's capitalization by about 50% and use the money for restructuring steps. These include cuts in its workforce as well as reducing employee payments and allowances.

The banks' debt waivers will enable Daikyo to offset valuation losses in real estate holdings, while it will put 30 billion yen from the debt-for-equity swap deals into its depleted capital and another 30 billion yen into its capital reserves.

By the end of the restructuring, Daikyo expects to have squeezed the group debts to 370 billion yen from the current level of about 1.07 trillion yen, it said.

Daikyo said it will apply for a rehabilitation designation under a corporate restructuring and revival law. The designation could make the ailing firm eligible for preferential treatment, such as lower taxes on debt-for-equity swaps.

Daikyo said it expects to post an extraordinary loss of 473.86 billion yen in the current business year to next March 31, due to valuation and investment losses as well as restructuring costs.

In view of the loss, Daikyo revised downward its consolidated prospects for the current year to next March 31.

It said the group will report a net loss of about 385 billion yen, against a profit of 6.2 billion yen the year before, and pretax profit of around 8.7 billion yen on sales of some 342.3 billion yen.