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Takefuji announces exchange offer and issue of Euro-yen straight bonds due 2011

TAKEFUJI CORPORATION (the "Company") today announced that it is commencing an exchange offer and that it resolved to issue Euro-yen straight bonds due 2011 ("New Bonds") at a board meeting of the Company held on November 16, 2009. 

• Background to the Bond Issue and Exchange Offer

The business environment presently experienced by consumer finance companies does not permit any optimism. The industry is faced by problems including declining loan portfolios stemming from tighter credit policies adopted in anticipation of the forthcoming full implementation of a new Money Lending Business Law, a continuing high number of claims from customers for the repayment of interest paid voluntarily (excess interest repayments) and the publicisation of the liquidity problems of a leading consumer finance provider. In these conditions the liquidity position of the Company has been adversely affected by downgrades by Moody's and Standard & Poor's which triggered an early repayment covenant included in the consumer loan receivables trust agreement with respect to the true sale securitisation facility extended by Bull Capital Co., Ltd. in July 2005, along with similar triggers set out in other agreements. In fact, while reviewing various measures to raise funds to improve our liquidity position, the funding environment for the Company has become extremely difficult due to the worsening business environment surrounding the consumer loan industry and the global financial crisis resulting from the bankruptcy of Lehman Brothers group amongst other negative factors.  

In these circumstances, the Company has concluded that it is critical that it reduce the outstanding Takefuji Corporation JPY70,000,000,000 1.5 per cent. Convertible Bonds due 2018 (the "Convertible Bonds"), holders of which are entitled to require the Company to redeem the same in June 2010. To this end, we have decided to make an offer to holders of the Convertible Bonds to exchange their Convertible Bondsfor either (i) cash only consideration or (ii) an amount of Euro-yen straight bonds due 2011 together with a partial cash consideration (the "Exchange Offer").

2.      Purpose of the Exchange Offer

The Convertible Bonds include redemption options exercisable in June 2010 by the bondholders, the principal amount of which is expected to amount to as much as JPY70bn. Therefore the Company has decided that the reduction of the amount of the outstanding Convertible Bonds must be completed urgently. Our objective is to improve our liquidity position looking towards June 2010 by making an offer to holders of the Convertible Bonds to exchange their Convertible Bonds for either (i) cash only consideration or (ii) an amount of New Bonds, the terms and conditions of which are described in 4 below, together with a partial cash consideration.

Furthermore, the Company has sold and disposed of certain assets in order to increase cash at hand and has future plans to dispose of additional assets which may result in substantial losses recorded for accounting purposes.  If the Exchange Offer is concluded in a way which meets the Company's expectations then the losses resulting from the disposal of additional assets referred to above will be offset to some extent by the profits gained on the purchase of Convertible Bonds for cash only consideration.

  

3.    Summary of the Exchange Offer 

 

(1)	Target securities	Takefuji Corporation JPY70,000,000,000 1.5 per cent. Convertible Bonds due 2018
(2)	Exchange consideration	The consideration for Convertible Bonds being exchanged will be paid in the form of (i) cash only consideration or (ii) a combination of cash and New Bonds (holders who are residents of Japan will only be allocated cash only consideration). The amount of the cash only consideration or partial cash consideration will be determined according to a modified auction process. In the case of (i), the cash consideration will be at least 50% and in the case of (ii), the cash consideration will be at least 25%, of in each case of the principal amount of the Convertible Bonds. In the case of (ii) the aggregate of the principal amount of the New Bonds and the cash consideration will be similar to the principal amount of the Convertible Bonds. The total aggregate amount of cash paid in (i) and (ii) will be up to JPY18bn.
(3)	Tender period	From Nov 16, 2009 (Mon) to Dec 2, 2009 (Wed) (London Time) (planned)
(4)	Total principal amount of the Convertible Bonds to be purchased	Up to JPY40bn
(5)	Settlement date	Dec 14, 2009 (Mon) (London Time) (planned)
(6)	Qualified Applicant	Only holders of Convertible Bonds are qualified to participate in the Exchange Offer. Holders of repackaged notes of which the underlying assets are Convertible Bonds must exchange their repackaged notes for Convertible Bonds in order to participate in the Exchange Offer. Participation in the Exchange Offer is also subject to certain other restrictions.

4.   New Bonds

(1)	Name of securities	Euro-yen straight bonds due 2011
(2)	Total issue size	JPY30bn (maximum amount)
(3)	Amount payable	100% of principal amount (planned) Instead of a payment in cash as consideration for the New Bonds, the Convertible Bonds are to be delivered
(4)	Payment date	Dec 14, 2009 (planned)
(5)	Coupon rate	10% p.a. (planned)
(6)	Redemption date	April 11, 2011 (planned) 10% of principal amount scheduled to be redeemed in each month from July 2010 until Redemption date

5.    Timeline of the Exchange Offer (planned)

Nov 16, 2009	Resolution to issue the New Bonds
Nov 16, 2009	Start of tender period for the Exchange Offer
Dec 2, 2009	End of tender period for the Exchange Offer
Dec 4, 2009	Announcement of results and pricing of the Exchange Offer Finalisation of the amount to be issued
Dec 14, 2009	Issue of the New Bonds and settlement of the Exchange Offer

The Company will make a further press release on 4 December 2009 entitled "Announcement of results and pricing of the Exchange Offer and finalisation of the amount to be issued".

In terms of the effect of the Exchange Offer on the Company's profit and loss, the Company will make a further announcement at the time when the outcome of the Exchange Offer has been confirmed, taking into consideration the effect on the Company's profit and loss of the other measures conducted by the Company.

This press release does not constitute an offer of any securities for sale. This press release has been prepared for the sole purpose of publicly announcing the exchange offer, etc. in respect of the Company's Euroyen Convertible Bonds due 2018, and not for the purpose of soliciting investment or engaging in any other similar activities within or outside Japan. This press release does not constitute or form a part of the offer of the Bonds for sale in the United States. The Bonds have not been, and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"). The securities may not be offered or sold in the United States or to, or for the account or benefit of, U.S. person (as defined under Regulation S of the Securities Act) absent registration or an exemption from registration under the Securities Act. The securities will not be publicly offered or sold in the United States.

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