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Japanese bad-loan agency wants to rescue companies

Japan's bad loan agency, set up to collect from deadbeat borrowers, has identified 90 companies it plans to rescue, broadening its mission under government pressure to limit bankruptcies.

The Resolution and Collection Corp is holding weekly meetings with the state-run Development Bank of Japan, which will provide the loans to companies willing to reorganize to make profits, spokesman Takayuki Okuno said. Another 120 may be added to the roll of companies worth saving, he said.

"The government is asking us to rehabilitate companies," Okuno said in a telephone interview. "The RCC doesn't have the capability to inject money so we have to tie up with others."

Japan's Prime Minister Junichiro Koizumi said on Sunday that he will push ahead with plans that would force banks to recognize more of their loans as sour. He also wants to limit the impact on the economy of resulting bankruptcies, which already averaged 53 a day this year.

That's where the RCC can play a role. The agency is increasing its purchases of debts from banks, seeking to become the biggest creditor of a company so that it can control whether companies are rehabilitated or forced into bankruptcy. That's squeezing out investors trying to buy bad loans at a fraction of face value and sell off assets for a faster profit.

"The fact the RCC is competing against the private sector is a waste of taxpayers' money," said Mikihisa Hirai, executive managing director Asia for GMAC Commercial Holding. GMAC, which is a subsidiary of General Motors Corp, has bought ?60 billion of assets in Japan and competes with the RCC at bad-loan auctions.

The RCC won as many as half the auctions of bad loans this year. Its low funding cost, less than 1 percent, lets it outbid rivals such as Cerberus Partners LP, GMAC and Morgan Stanley, said Mark Grinis, managing partner at Ernst & Young LLP in Japan.

The RCC has bought ?8.7 trillion (US$70 billion) of bad loans in its seven-year existence, employing a team of martial arts experts to help secure repayment from companies.
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