Japan Lacks Will To Restructure
Financial black holes have popped up around the planet, sucking in not only light but wads of cash. The next sightings may be over Japan.
Cash and equity levels at Japan's major electronics makers are dropping fast as losses mount. The nine largest expect net losses to total $19 billion in the fiscal year that ends this month.
Substantial restructuring is in order -- unprofitable business lines have to be closed and some production switched to cheaper locales -- if the companies are to survive a prolonged slump in demand. But they lack the financial wherewithal to take these steps, says Yuichi Akai, an M&A banker at Daiwa Securities SMBC.
Japan's government, central bank and state-backed lenders are buying corporate debt and equity stakes. Bank loans also are up.
Still, further fund raising from capital markets will be necessary, analysts say. And that could be bad news for shareholders, who so far have avoided adding dilution to the litany of concerns surrounding Japan's manufacturers.
Rating companies are keeping an eye on debt burdens, which could leave companies favoring stock issuance. On Wednesday, Fitch Ratings downgraded the debt of six blue-chip firms -- Panasonic, Sharp, Hitachi, Sony, NEC, and Toshiba.
The need could be large. Earlier this month, Goldman Sachs forecast that Toshiba may need as much as $3 billion in new capital. Toshiba declined to comment.
Already, Panasonic, to fund its acquisition of Sanyo, has raised $4.2 billion in debt, the biggest offering since 2002 from a nonfinancial company in Japan, according to Dealogic.
Bankers will surely welcome the fees generated by cash calls. Stock issuance by Japan's nonfinancial companies, in particular, has fallen sharply along with markets.
With stocks still in the tank -- the Nikkei Stock Average of 225 companies hit 26-year lows this week -- investors might welcome shares at heavily discounted levels, provided the funds are used to turn themselves around.
That remains a big 'if.' Even if companies line up finances, there is little guarantee that they won't just muddle through as usual.
That is even more of a concern if rights issues accompany funding from the government, which lacks the political will to force restructuring painful to the wider economy. |
|
