SFCG Co. Collapses with Huge Liabilities
Hit hard by tightened credit, commercial lender SFCG Co. filed for bankruptcy protection Monday under the Civil Rehabilitation Law with debts totaling 338 billion yen.
The Tokyo District Court approved the application and ordered the protection of the company's assets, they said.
Formerly named Shohkoh Fund & Co., the leading provider of short-term loans to small and midsize companies had been hit hard by the global financial crisis.
SFCG, listed on the First Section of the Tokyo Stock Exchange, earned notoriety for charging excessively high interest rates and using heavy-handed debt collection techniques.
It faced many suits from borrowers seeking refunds for excess interest payments.
There are concerns its collapse could lead to cuts in refunds, stall pending lawsuits and affect cash flows to its borrowers.
According to credit research firm Teikoku Databank Ltd., SFCG's total debts have been the largest among listed companies that went under during fiscal 2008, exceeding the 255.8 billion yen owed by condominium developer Urban Corp. When unlisted firms are included, SFCG ranked fifth.
The TSE said it will delist SFCG on March 24.
SFCG Chairman Kenshin Oshima said Monday the company had become cash-strapped as the credit crunch hit the financial and real estate markets following Urban Corp.'s collapse last August.
"We became hardly able to raise funds from financial institutions, and the situation further deteriorated after Lehman Brothers collapsed (in September)," he said.
Oshima had concurrently held the presidency until Friday, when the company set up a new management team under a new president.
But it decided to file for civil rehabilitation Sunday night after failing to secure about 10 billion yen in loans in negotiations with a major financial institution, officials said.
But the move surprised SFCG employees, shareholders and creditors since the company held an extraordinary shareholders meeting only three days before on Friday.
The meeting approved a proposal to raise director remunerations. Oshima also promised efforts to increase dividends to shareholders.
"What was that shareholders meeting about after all?" one infuriated shareholder said.
In an earlier sign of its woes, SFCG had 5.5 million yen in cash seized Thursday under the Tokyo court's order after failing to meet a deadline to repay excess interest to a borrower.
The company's high-interest loans and forcible collection methods surfaced as a problem around 1999.
It received business suspension orders by the Financial Services Agency in 2000 and 2005 for forgery of documents and other problems.
It faced many lawsuits for refunds of excess interest after a Supreme Court ruling in 2006 invalidated interest rates exceeding legal limits. Such repayments exceeded 10 billion yen a year, a factor in its funding difficulties.(IHT/Asahi: February 24,2009)
The Tokyo District Court approved the application and ordered the protection of the company's assets, they said.
Formerly named Shohkoh Fund & Co., the leading provider of short-term loans to small and midsize companies had been hit hard by the global financial crisis.
SFCG, listed on the First Section of the Tokyo Stock Exchange, earned notoriety for charging excessively high interest rates and using heavy-handed debt collection techniques.
It faced many suits from borrowers seeking refunds for excess interest payments.
There are concerns its collapse could lead to cuts in refunds, stall pending lawsuits and affect cash flows to its borrowers.
According to credit research firm Teikoku Databank Ltd., SFCG's total debts have been the largest among listed companies that went under during fiscal 2008, exceeding the 255.8 billion yen owed by condominium developer Urban Corp. When unlisted firms are included, SFCG ranked fifth.
The TSE said it will delist SFCG on March 24.
SFCG Chairman Kenshin Oshima said Monday the company had become cash-strapped as the credit crunch hit the financial and real estate markets following Urban Corp.'s collapse last August.
"We became hardly able to raise funds from financial institutions, and the situation further deteriorated after Lehman Brothers collapsed (in September)," he said.
Oshima had concurrently held the presidency until Friday, when the company set up a new management team under a new president.
But it decided to file for civil rehabilitation Sunday night after failing to secure about 10 billion yen in loans in negotiations with a major financial institution, officials said.
But the move surprised SFCG employees, shareholders and creditors since the company held an extraordinary shareholders meeting only three days before on Friday.
The meeting approved a proposal to raise director remunerations. Oshima also promised efforts to increase dividends to shareholders.
"What was that shareholders meeting about after all?" one infuriated shareholder said.
In an earlier sign of its woes, SFCG had 5.5 million yen in cash seized Thursday under the Tokyo court's order after failing to meet a deadline to repay excess interest to a borrower.
The company's high-interest loans and forcible collection methods surfaced as a problem around 1999.
It received business suspension orders by the Financial Services Agency in 2000 and 2005 for forgery of documents and other problems.
It faced many lawsuits for refunds of excess interest after a Supreme Court ruling in 2006 invalidated interest rates exceeding legal limits. Such repayments exceeded 10 billion yen a year, a factor in its funding difficulties.(IHT/Asahi: February 24,2009)
source: The Asahi Simbun (www.asahi.com)
