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Mainland group absorbs debt laden Kokuba Group

Date Posted: 2006-04-01

Okinawa’s largest construction company, mired in debt for more than a dozen years, is being taken over by mainland Japan financing company Lisa Partners.

Kokuba Group, currently entangled with more than Y28,000,000,000 in debts to a pair of Okinawa banks, has agreed to become part of Lisa Partners in a reorganization plan designed to strengthen its business position. Lisa Partners’ president says his company will try to make the Kokuba’s financial and sales section become more efficient and more aggressive in pursuing new business.

The Bank of the Ryukyu and Bank of Okinawa have been struggling to provide sound financial advice to Kokuba over the past decade, but now say they’ve given up. They say they cannot continue to hold the outstanding loans, racked up in part by Kokuba’s investments in failed resort project development.

Kokuba has had some of its operating companies go into bankruptcy in recent years, leading to a 1993 agreement to reorganize under plans by the two banks.

Kokuba’s terminated 19 staff and sold unprofitable operating companies and properties, but it hasn’t been enough. Construction projects have dwindled in the past few years, leaving its hotels, movies and restaurants pacing the profits. Kokuba reports profits of Y2,600,000,000 over the past 15 years.

Still, it hasn’t been enough to service the loan debt. Bank of Okinawa and Bank of the Ryukyu have turned to fund management investors to divide up the Kokuba operations into construction and service entities. Kokuba’s board of directors objected, leading to further debt. Bank loans to Kokuba through 2005 total Y13,000,000,000 to one, and Y10,000,000,000 to the second.

The Ministry of Financial Services are becoming tough on Kokuba, as a March deadline for changes approached. The realignment to Lisa Partner should lead to profits for Kokuba operations, although the ownership shifts from Okinawan to mainland Japanese investors.

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