Ousted Olympus Corp. <7733.T> CEO Michael Woodford widened his bid for regulators to probe the endoscope maker's controversial payments to advisory firms by urging Japan's securities watchdog to investigate.

The deepening scandal prompted investors to sell Olympus's shares for a fifth straight day on Thursday and a Japanese ratings agency said it might downgrade the company's credit rating.

Olympus has lost close to half its market value in a matter of days, raising speculation it could become a takeover target.

The chief executive turned whistleblower told Reuters on Wednesday he had sent a letter to Japan's Securities and Exchange Surveillance Commission (SESC) to look into the abnormally high fees involved in Olympus's $2.2 billion acquisition of British medical equipment maker Gyrus in 2008.

Woodford, who was dismissed just two weeks into the job, took his case to British fraud investigators earlier this week since most of the Gyrus deal was paid for through an Olympus subsidiary in the UK.

The fees, equal to a third of the acquisition price, is stratospheric compared with an industry standard of 1 percent to 2 percent of a deal's value.

An SESC official declined to confirm whether it had received Woodford's correspondence, saying it does not comment on individual cases.

Any probe by the SESC could take months. If a breach of the Financial Instruments and Exchange Act is found, it could lead to a fine. In the case of a serious offence, the prosecutors' office could launch a criminal investigation.

Olympus, which announced on Friday that it had fired Woodford for poor management, acknowledged for the first time on Wednesday that it had paid the hefty fee to the advisers as part of the Gyrus takeover. But it declined to identify them and said it no longer knew of their whereabouts.

The 51-year-old, who had spent 30 years at Olympus, is now back in Britain. He identified the advisory firms as New York-based AXES America LLC and Axam Investments Ltd in the Cayman Islands.

In a September-dated letter to Olympus chairman Tsuyoshi Kikukawa, Woodford said he was staying away from Japan because he had been advised that his personal safety could be at risk.


Olympus's market value has slumped close to $4 billion since the company announced the dismissal of the executive, who as recently as October 1 had been praised in a company press release for his performance. Olympus is now worth around $4.9 billion.

Shares of Olympus fell 4.9 percent on Thursday, the fifth day of losses.

Olympus could be an attractive acquisition target if the share price drops enough and it clears up the uncertainties about potential legal challenges. Olympus has decent free cash flow, said CLSA analysts in a note.

Olympus dominates the global flexible endoscope market, and there are many companies that would like to enter the lucrative medical-equipment business.

Woodford has called on Olympus's shareholders to demand the removal of the board and a detailed examination of all the company's acquisitions over the past decade.

Under the spotlight is 73.4 billion yen ($956 million) paid by Olympus for acquiring three small Japanese firms-- News Chef Co Ltd, which makes microwaveable cookware, Altis Co Ltd, which recycles medical waste, and on-line cosmetics firm Humalabo Co Ltd.

Olympus wrote down 75 percent of the value of the firms, which are all based in the same Tokyo building and employ a total of about 130 people, in the fiscal year it had bought them.

The deals alongside the Gyrus takeover have resulted in $1.3 billion destruction of shareholder value, Woodford says.

Japanese ratings agency R&I on Thursday said it had put Olympus's credit rating on watch for a possible downgrade because of the management turmoil.

R&I has an A-rating on Olympus, suggesting high creditworthiness. It had affirmed the rating on August 29 but with a negative outlook.

Olympus is highly geared, with net debt-to-equity ratio running at almost 300 percent, CLSA analysts said.

Outstanding debt is $4.9 billion, most of which is made up by loans, Thomson Reuters Credit Views showed.

All of the company's bonds are privately placed and so do not trade very often.

A structural credit risk model from Thomson Reuters Starmine that assigns a credit rating based in part on equity market volatility and the Olympus's market value as of October 19 applied a BB-rating to the company, implying a ranking below investment grade, or junk.

That rating was also the lowest among the company's competitors on Starmine.

Olympus is set to unveil its July-September earnings on November 8 and Chairman Kikukawa, accused by Woodford of running the company like a total emperor system, is set to speak on global social responsibility on October 25 at a form sponsored by the Nikkei newspaper. ($1=76.78 yen)

(Reporting by Hideyuki Sano, Lisa Twaronite, James Topham and Noriyuki Hirata and Kevin Plumberg. Writing by Tim Kelly and Isabel Reynolds; Editing by Miyoung Kim and Neil Fullick)