Japan's disgraced Olympus Corp <7733.T> may sell assets to help pay down £2.16 billion in debt under a plan aimed at keeping the support of lenders in its battle to survive an accounting scandal, the Nikkei business daily said on Thursday.
Olympus's bank creditors are crucial to its prospects of coming through the scandal, given the company is relatively highly geared and is expected to have to make some hefty writedowns once its accounts are put straight.
The once-proud maker of cameras and medical equipment put forward the proposal at a meeting with creditors on Wednesday, offering to cut its debt by about 260 billion yen ($3.38 billion) over the next three years, the Nikkei said.
It appears to be considering selling assets as a means of repaying debts, in addition to tapping cash reserves and cash flow, the newspaper said in an unsourced report, although it quoted a senior banker as saying Olympus did not face any imminent cash crunch.
The company has lost about 70 percent of its market value, and is under investigation by police and regulators, after admitting this month to hiding investment losses from investors for decades and using payments linked to mergers and acquisitions to aid the cover-up.
The M&A payments included a huge $687 million fee paid to obscure financial advisers for Olympus's $2.2 billion purchase of UK medical equipment firm Gyrus in 2008. The fee is the world's biggest, according to Thomson Reuters data.
Olympus has told its creditors that its acquisition costs for Gyrus were overstated by 33.4 billion yen ($434 million) at the end of fiscal 2010, the Nikkei said, though an independent panel commissioned by Olympus was still probing the matter.
The Asahi Shimbun newspaper said Olympus would have to write off this amount from its books, though it added that its equity would still exceed its net debt after this restatement.
At Wednesday's meeting, which involved about 100 bankers, two major creditors, Sumitomo Mitsui Banking Corp and Bank of Tokyo-Mitsubishi UFJ (BTMU) said they would continue to support the firm, multiple sources told Reuters.
Sumitomo Mitsui Banking Corp is the core banking unit of Sumitomo Mitsui Financial Group <8316.T>, and BTMU is the main unit of Mitsubishi UFJ Financial Group <8306.T>.
Olympus' interest-bearing debts stood at about 650 billion yen ($8.45 billion) on a consolidated basis as of end-March. SMFG and BTMU have total loans of over 400 billion yen to the firm, which also borrowed about 100 billion yen in syndicated loans, according to banking sources.
Olympus's battered shares have staged a comeback this week, on hopes the company can avoid a delisting from the Tokyo stock exchange and that the brunt of any punishment will fall instead on executives found responsible for the scandal.
Delisting would effectively cut the company off from equity capital markets and make it tougher for it to survive.
But some experts say it may be difficult to prevent delisting, given past precedents, the Tokyo exchange's own rules and a sense in some quarters in Japan that the company deserves to be brought low for its failings.
Exchange rules state that a firm will be delisted if it has made false statements in its annual or half-year reports and those falsehoods would have a material impact on the shares.
($1 = 76.950 Japanese Yen) (Reporting by Shounak Dasgupta in Bangalore; Editing by Mark Bendeich)