Sun, Mar 03, 2002 - Page 11 News List

Sato Kogyo may seek protection from its creditors

BLOOMBERG , TOYAMA, JAPAN

Sato Kogyo Co, a Japanese general contractor with ?311 billion (US$2.3 billion) in debt, plans to file for protection from creditors, Kyodo News reported.

The company will probably seek help from Japan's courts after its main lender, Dai-Ichi Kangyo Bank Ltd, decided the contractor would not be able to pay its debts, Kyodo and the Nihon Keizai newspaper reported.

Sato Kogyo builds bridges and tunnels, projects Prime Minister Junichiro Koizumi wants scaled back to save money as he battles a recession. He's also urging banks to cut support to companies that aren't paying their debts, a policy he said helped prompt Aoki Corp, another contractor, to seek bankruptcy protection in December.

No one at Sato Kogyo's Tokyo office answered telephone calls seeking a comment. The company had 4,509 employees as of March 31, the end of its fiscal year. Among its projects, the company helped build Singapore's subway system.

Japanese newspapers were speculating in January that Sato Kogyo was considering a merger with Hazama Corp and Tobishima Corp, until a company official denied the reports. An agreement would have created one of the biggest contractors in Japan.

The nation's economy is in its third recession in a decade, and bankruptcies are increasing. The figure rose for a fifth month in January, opening a year that analysts said may be a record.

Construction companies and retailers accounted for half of the 1,543 businesses that folded in January, according to Tokyo Shoko Research Ltd. The construction industry employs about one in every 10 workers in Japan.

Sato Kogyo and other Japanese contractors accumulated debt in the late 1980s to develop property that later fell in value as Japan's economy slipped into 11 years of recession and no growth.

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