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Tuesday, June 23, 1998

White elephant tries to move decades of debt

BY SAYURI DAIMONStaff writer

A nearly bankrupt semi-governmental firm sitting on a large plot of land nearly equal in size to the area inside Tokyo's Yamanote Line has come up with a plan to put itself back on its feet.

Mutsu Ogawara Development Inc., a firm jointly established by the government and the private sector to develop a 5,280-hectare area in Aomori Prefecture, has decided to cut its workforce and ask banks to postpone interest payments worth 8 billion yen annually until next year, sources close to the company said.

The company was jointly set up by the central government, the Aomori Prefectural Government and the Japan Federation of Economic Organizations (Keidanren) to develop a petrochemical complex in 1971.

It failed to proceed with the project after the two oil crises of the 1970s and is now burdened with accumulated debts of 230 billion yen. It has no large-scale projects planned for the site.

Its situation is another example of the many joint projects started by the government and the private sector during Japan's rapid economic growth. Another development project that is in the red is in eastern Tomakomai, Hokkaido.

With the changes in the economic environment, many of the joint projects have been left untouched for long periods without a concrete vision for the future. Observers suggest it is about time the projects be thoroughly reviewed so they might be able to generate money in the future.

By the end of this month, Mutsu Ogawara Development needs to make interest payments of 2.1 billion yen; the firm is reportedly capable of paying 900 million yen.

Under the bailout plan, the company will ask the government-affiliated Hokkaido-Tohoku Development Finance Public Corp. to postpone its interest payments of 1.3 billion yen, due this month, until September 1999.

Loans extended by the financial institution account for nearly 40 percent of the company's total loans. The sources said Mutsu Ogawara Development will pay more than 30 commercial banks interest totaling 800 million yen due this month but will ask the banks to postpone interest payments due in September until next year.

The ailing company also plans to cut its employees from about 40 to 15 while seeking financial support from Keidanren. Since its petrochemical complex project failed, the firm has been looking to sell its 2,800 hectares, but more than half of the property remains unsold.

Some of the land has been sold to Japan Nuclear Fuel Ltd., which is developing part of the site known as Rokkasho Village for nuclear power-related facilities.


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