Tokyo Electric Power Co <9501.T> should go through a court-led restructuring similar to Japan Airlines, the head of the Tokyo bourse was quoted as saying, sending the utility's stock tumbling to an all-time low on the possibility of a delisting.
Japan's government, however, reiterated there would be no such restructuring of the operator of the quake-hit Fukushima Daiichi nuclear plant, which it has said should remain solvent and listed as it battles to restore power output and compensate victims of the nuclear crisis.
Tokyo Stock Exchange head Atsushi Saito, who used to head a state-backed turnaround body, said temporary nationalization for the troubled utility should be considered and that creditors would likely have to forgive loans.
It would be good if Tepco could be handled in the same way as JAL, Saito was quoted as saying in an interview with Asahi Judiciary, an online magazine owned by the Asahi newspaper.
After filing for bankruptcy last year, Japan Airlines was delisted and has since completed a court-led restructuring.
His comments could change the tide... there was some criticism over politicians' moves to save the utility firm and keep it listed but until now that criticism has not had much of an impact, said Fujio Ando, an advisor at Chibagin Asset Management.
Tepco's stock dived 24 percent to 218 yen, falling at one point by its daily limit to a lifetime low of 206 yen, down some 90 percent since Japan's March 11 earthquake triggered the utility's nuclear crisis.
Stocks in banks, some of which are big lenders to Tepco and major shareholders, also fell on his comments.
The spread on Tepco's five-year credit default swaps spiked after Saito's comment to a record 1,150 basis points, up 200 basis points from Friday. That means it costs $1.150 million to insure $10 million of Tepco's debt against default. Ratings agency Standard & Poor's last week cut Tepco's debt to 'junk' status.
Speaking after the latest dive in Tepco shares, the government's main spokesman said the state would consider finding Tepco a revitalization sponsor as it did with JAL.
Chief Cabinet Secretary Yukio Edano, however, insisted his government there would be no court-led restructuring, which he said would cause a very big problem.
He vowed to win lawmaker approval as soon as possible for the plan to use taxpayers' money to save Tepco from collapse and to compensate victims of the nuclear crisis.
CLEAR RULES NEEDED
Saito urged the government go further and adopt a clear set of rules to handle the utility just as it did with troubled banks during Japan's financial crisis in late 1990s.
For Tepco too, the government should make a special law. It should do a thorough investigation of its assets and if its liabilities exceed its assets then it should be nationalized temporarily and its assets should be reorganized, he said.
Banks and other creditors should be asked to forgive loans to a certain degree. During this process, the sale of grids and nationalization of nuclear plants might be considered, he said.
The Tokyo bourse said has no authority to delist Tepco as long as its financial statements are in order and that Saito was just expressing his personal opinion.
Tepco is still struggling to bring its Fukushima Daiichi nuclear plant under control nearly three months after it was crippled by a massive earthquake and tsunami, and much uncertainty hangs over the proposed compensation scheme.
Fukushima Daiichi's reactor cooling systems were knocked out by the March 11 disaster, causing a fuel meltdown at three of the reactors and forcing the evacuation of about 80,000 residents near the plant.
Kyodo news agency reported on Sunday that the company was expected to post a parent-only net loss of 570 billion yen ($7 billion) for the year to next March 31, excluding compensation costs.
(Additional reporting by Mariko Katsumura, Antoni Slodkowski and Ayai Tomisawa; Editing by Edwina Gibbs and Lincoln Feast)