Lenders set to confront Olympus Corp

Japanese company faces being delisted from the stock market

TOKYO - Lenders will confront Japan's Olympus Corp next week to demand an explanation for an accounting scandal engulfing the company, according to a banking source on Friday. The source denied reports that lenders will seek more security over their loans.

The disgraced maker of cameras and medical equipment risks being delisted from the stock market, and is being investigated by police and regulators, after this week admitting to hiding investment losses for decades and using merger and acquisition payments to aid the cover-up.

The Nikkei newspaper said the concealment could have exceeded 130 billion yen ($1.68 billion) at its peak, adding that creditors were likely to press for a change in lending terms.

But the banking source denied this was the purpose of the meeting between Olympus and its creditors, which include Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group. The meeting is likely to take place on Nov 16, two banking sources said.

Delisting would effectively leave the 92-year-old company cut off from equity capital markets at a time when its shares have already lost three-quarters of their market value and its balance sheet is vulnerable to major asset writedowns.

The stock see-sawed in heavy trade on Friday, losing as much as 10 percent to 435 yen in an initial wave of selling, before recovering within minutes to register a small gain.

It finished at 460 yen, down 5 percent on Thursday's close, having lost $7.1 billion in market capital since the scandal broke on October 14.

Traders said the volatility would likely persist, with buyers emerging as the stock sinks close to its book value, thought to be around 430 to 436 yen.

"This is what the traders are rallying on right now and that perceived price point is creating demand," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Olympus had about $9 billion in short- and long-term borrowings on its books as of June 30, including corporate bonds.

Tokyo's stock exchange has told Olympus it will be delisted if it fails to report earnings by Dec 14. Olympus says it aims to meet that deadline.

Delisting would take effect on Jan 15 in principle if Olympus does not meet the reporting deadline. Even if it meets the deadline, the bourse could still decide to delist the company, depending on the scale of its past misreporting.

Olympus' largest foreign shareholder, Southeastern Asset Management, has said delisting would have "vast negative ramifications" for foreign investment in Japan.

"The parties who are responsible for this, the past management teams and the board of directors, are the ones who need to be sanctioned and the good parts of Olympus need to be protected for the good of the public, the staff, not to mention the shareholders," Josh Shores, a principal at the fund manager, said on Thursday.

Nikkei's report on Friday said Olympus had hidden its long-standing investment losses behind a facade of inflated bank deposits and securities holdings, a wall of assets that reached its peak at the end of March 2005.

Quoting unnamed sources, it said Olympus had moved the impaired securities off its books to prevent painful writedowns that would have followed the adoption of fair-value accounting in fiscal 2000.

Reuters

(China Daily 11/12/2011 page10)