Huis Ten Bosch, a debt-ridden theme park in southern Japan built like a medieval Dutch town, collapsed yesterday as its main creditor struggles to get rid of massive bad loans.
Liabilities totalled ¥228.9 billion (US$1.9 billion dollars), the largest ever sum left by a failed theme park in Japan.
Huis Ten Bosch Co Ltd, the operator of the sprawling park surrounded by luxury holiday houses and hotels, filed for court protection from creditors at the Sasebo branch of Nagasaki District Court, the company said.
The failure is also the second largest in Japan's resort business after the Seagaia luxury resort complex, which went bust with debts of ¥320 billion in 2001. It is now restructuring its operations under US investment fund Ripplewood Holdings.
Huis Ten Bosch admitted it had become difficult to expect Mizuho to offer substantial fresh financial support in the face of a government drive to revive the financial system plagued with bad loans. The park will continue operating while seeking a sponsor.
Japanese banks are under pressure to halve the ratio of massive bad loans on their books by March 2005 to help boost the recession-weary economy.
Chief Cabinet Secretary Yasuo Fukuda said it would be "very good if the company is reborn under the Corporate Rehabilitation Law and continues business."
Mizuho, the world's largest banking group in terms of assets, warned it may fail to recover all loans extended to the resort, but said this would not impact on its earnings forecasts for the year to March.
Mizuho Corporate Bank has ¥102.3 billion in claims against the company.
A bank spokesman Mizuho would continue to be involved in rehabilitating Huis Ten Bosch but would only work at the request of an administrator, who will devise a new reconstruction plan.
"In the past our assistance was to cover excessive liabilities, but generally speaking assistance as operational funds would not amount to an enormous sum," the spokesman said.
Huis Ten Bosch, meaning "House in Forest" in Dutch, opened in March 1992 in the city of Sasebo, some 950km southwest of Tokyo, drawing popularity on a par with Tokyo Disneyland.
Private and public investors, including municipal governments, financed the project.
The park was in the middle of a five-year rehabilitation plan devised in March 2000 with help from Industrial Bank of Japan, which is now part of mega-lender Mizuho Financial Group.
The main creditor had agreed to forgive loans of some 20 billion yen under the revival plan. In 2001, however, the continued sluggish business forced the bank to agree to increase debt waivers to a combined ¥53.1 billion.
Despite the waver, the resort said cost cuts and other rehabilitation efforts failed to compensate for slumping tourist numbers.
"While considering the recent social situation following the government's Financial Revival Program ... we cannot help judging that it is difficult to draw up measures to improve earnings to repay huge debts early," the firm said in a statement.
The Huis Ten Bosch project was burdened with excessive debts from the outset as its construction and other costs exploded to ¥220 billion against the initial estimate of ¥100 billion.