TOKYO, April 15 - Japan's industry revival body, a state-backed entity set up to help restructure companies burdened with bad loans, will report losses in its first two years in business, an official said on Tuesday. He added that the Industrial Revitalisation Corp (IRC) could buy up to about 7.3 trillion yen ($60.68 billion) in bad loans under its present financing arrangements, based on a simulation of its accounts. "Losses are likely for the first two years, but will stop in the third because we won't be buying any more debts," said the official of the IRC's preparatory office. He added that the figures in the simulation were not final and could change. The Nihon Keizai Shimbun newspaper reported earlier on Tuesday that the entity would buy 7.3 trillion yen in loans.
The IRC was set up last month as part of the government's efforts to revive the ailing economy. Its targets will be the thousands of companies struggling with loans they cannot repay and burdened with often unrelated businesses started in the boom years of the 1980s that are now unprofitable. Such companies can go to the IRC, which, if it judges they can be turned around, will buy bad debts from their banks and design a restructuring plan that gives them three years to meet set profitability targets. Analysts have said the body risks being left with loans on its books from companies that fail to meet their restructuring targets, meaning the taxpayer would be left to foot the bill. The IRC official acknowledged that it may be unable to sell on some of the debt, and will have to take on the liability itself. According to the simulation, the IRC will lose around 42 billion yen in its first year and about four billion in the second before turning a profit in the third year, the official said. The IRC will operate for five years.
Most of its funding will come from government-guaranteed loans, though it will also issue some bonds in the second year, he said, declining to give further details.//