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Tepco Bailout Fund Starts Steps to Raise 2 Trillion Yen

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Feb. 14 (Bloomberg) -- Japan’s government, seeking to bailout Tokyo Electric Power Co. after the Fukushima nuclear disaster, met representatives from about 100 financial companies as it prepares to raise as much as 2 trillion yen ($26 billion) of loans, five people involved in the meeting said.

The government-run Nuclear Damage Liability Facilitation Fund hosted its biggest meeting yet with banks on obtaining a syndicated loan, which will be guaranteed by the government, with a borrowing period of less than one year, according to presentation materials obtained by Bloomberg News.

Almost one year after the Fukushima disaster, the worst nuclear crisis since Chernobyl in 1986, forced the evacuation of 160,000 people, the government is still thrashing out plans to save Tepco from bankruptcy and ensure it meets compensation claims. A government panel has said Tepco may have to pay damages of 4.5 trillion yen ($57.8 billion) by March next year.

“Indecision is the biggest risk. The current environment surrounding Tepco is very opaque and the government must unveil its intentions soon,” Takashi Aoki, who helps manage 120 billion yen at Tokyo-based Mizuho Asset Management Co. said by phone today. “The clock is ticking.”

The loan size and timing of bids weren’t announced at the meeting, the people said, declining to be identified because the information isn’t public. Banks wishing to lend funds will need to register with the fund by around March 14, the presentation material says.

Loan Guarantee

“The yield on one-year Japanese government bonds will be used as one of the benchmarks,” Junichi Shimizu, a credit analyst at Deutsche Bank AG in Tokyo said by phone. The loan is likely to pay interest similar to other state-backed companies such as the Deposit Insurance Corp of Japan, he said.

The fund may pay interest of around 0.2 percent for the loan, two of the people said.

The fund can use as much as 5 trillion yen of special bonds, some of which have been already issued by the government, to help the utility known as Tepco pay compensation to residents who lost their homes and livelihoods and for damages to forestries, fisheries and farms.

The fund has a loan guarantee line of as much as 2 trillion yen to obtain shares in Tepco or lend to the operator of the crippled Fukushima Dai-Ichi station. The special bonds, which can be immediately redeemed, may be only used for compensation payments.

Mizuho Corporate Bank Ltd. is the arranger for the syndicated loan, according to the material.

Tepco yesterday received extra aid of 689.4 billion yen from the government and is seeking a larger bailout as it sits on the edge of bankruptcy. Japan’s trade and industry minister, Yukio Edano, told Tepco President Toshio Nishizawa the government won’t approve the broader package unless it gets “sufficient” voting rights.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net; Emi Urabe 占部絵美 in Tokyo at eurabe@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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