June 3 (Bloomberg) -- Takefuji Corp., Japan’s third-largest consumer lender by market value, aims to raise as much as 100 billion yen ($1 billion) to weather an industry crisis that pushed half of its rivals out of business in the past four years.

The Tokyo-based company, which plans to securitize its own loans and borrow from other institutions this fiscal year, may sell 10 billion yen of asset-backed debt within a month, said President Akira Kiyokawa.

“It’s a big deal for us to be able to sell securities again as the market has been frozen for the last eight months,” Kiyokawa, 67, said in an interview at his office today.

Takefuji lost 723.3 billion yen during the past three years, more than any other consumer lender in Japan, as a crackdown by authorities on excessive interest rates made it liable to pay refunds. Moody’s Investors Service said last month it may cut the company’s debt rating to junk.

“If they can start selling securitized loans again, it’s a positive,” said Kristine Li, a Tokyo-based analyst at KBC Securities. “But there are still many unknowns ahead.”

More than 8,000 of Japan’s consumer lenders have gone out of business since the Supreme Court in January 2006 invalidated contracts allowing lenders to charge as much as 29 percent, according to rival Promise Co. The global financial crisis exacerbated their difficulties, shutting consumer lenders out of credit markets.

Shares Decline

“Takefuji’s funding profile may pose a challenge to the company’s management plans to stabilize its operating results,” Moody’s said in a statement on May 28, when it lowered Takefuji’s rating to Baa3, the lowest investment grade. Still, the company has sufficient reserves to cover risks related to interest refund claims, Moody’s said.

Takefuji shares declined 1.1 percent to 543 yen at the 3 p.m. close of trading in Tokyo, extending the stock’s slump during the past 12 months to 73 percent.

The company reduced loans by 28 percent to 861.5 billion yen in the fiscal year ended March 31 and plans to cut lending by 18 percent this year to 705.3 billion yen, according to financial statements.

The company forecasts net income of 13 billion yen for the current fiscal year. Kiyokawa said he would like to increase net income to as much as 70 billion yen in five years by increasing loans after interest refunds have stabilized.

Debt Limits

Takefuji doesn’t have a capital alliance with one of Japan’s biggest banks, unlike Acom Co., which is a unit of Mitsubishi UFJ Financial Group Inc. and Promise, in which Sumitomo Mitsui Financial Group Inc.’s banking unit has a 21 percent stake.

Takefuji isn’t considering a capital alliance with one of Japan’s big banks, according to Kiyokawa.

In December 2006, legislators gave consumer lenders three years to cap rates at 20 percent and to limit each borrower’s outstanding debt to no more than a third of their annual income. The legislation is set to come into effect by June of next year.

Many consumer finance and credit companies may not survive on their own unless the government takes steps to assist them, KBC’s Li said in a report dated yesterday. She didn’t name any companies.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net; Takako Taniguchi in Tokyo at ttaniguhi4@bloomberg.net

Last Updated: June 3, 2009 02:59 EDT