Tokyo Barrister: Start the law firm bankruptcy

Chapter 843 The Lion Opens His Mouth?!

The Minister of General Affairs once again stated that he had new demands to make.

The bank representatives present almost held their breath. Before coming, they had not expected that this meeting would contain such an astonishing amount of information. They thought that at most they would come to listen to Nippon Steel's explanation of its current financial situation. Unexpectedly, at today's meeting, Terada's words made them realize that an economic crisis was likely imminent.

"In addition to the three-month grace period—" Terada said, "We hope that all major banks will provide new additional loans to Nippon Steel."

Terada finished speaking.

The bank representatives present showed even more astonished expressions.

It’s not just three months of interest that needs to be sacrificed.

Now, the Minister of General Affairs has also asked for additional loans.

This is equivalent to saying that someone owes you money and doesn't repay it, but you continue to lend him money!

There is no such truth!

"The initial amount of additional loans required is 3700 billion yen," Terada added. "It is not ruled out that it will continue to increase in the future."

3700 billion yen?! This was a heavy blow to the bank representatives. If it was distributed among the banks, the additional loans they needed would be at least 600 billion yen.

Akiyama, the representative of the Tokyo Central Bank, looked very upset and immediately said, "Excuse me, Minister of General Affairs. Such a request is almost impossible to pass the bank's internal risk control process. The original three-month interest exemption was an uncertain thing. To continue to lend more than 600 billion yen to a company in trouble is a decision that no rational commercial bank would make!"

Shinsei Bank representative Momose also immediately said: "According to what you just said, Minister of General Affairs, Nippon Steel is already at risk of bankruptcy. How can our bank inject capital again? Minister of General Affairs, please understand that if we make additional loans and then encounter operational difficulties again, once we make provisions for bad debts of the loans, it may directly hit our bank's profits for the year."

The Shinsei Bank representative was not wrong.

The scale of loans provided by various banks to Nippon Steel is very large.

Once bad debt provisions are made, it is very likely that the profits for that year will be significantly reduced.

This is unbearable for banks.

What's even worse is that -

Once Nippon Steel's loans are written off as bad debts, banks will have to cut back on other businesses in order to maintain adequate reserves.

In simple terms, let's assume that a bank has 10,000 yen in principal. Without considering the multiplier, let's assume that the bank has lent out 9,000 yen. The remaining 1,000 yen is the reserve required by the regulator. Now, 1,000 yen of bad debt has appeared in the 9,000 yen. This bad debt is equivalent to directly offsetting the 1,000 yen reserve that was not lent out.

In this way, the reserve fund is equivalent to being reduced to zero.

However, banks must keep sufficient reserves. If they still need to keep 1,000 yen in reserves, it means that the bank will need to withdraw 1,000 yen from its existing 8,000 yen loan business.

So, it's a chain reaction.

Once the loan to Nippon Steel is written off as a bad debt, the bank will be forced to withdraw loans from other companies at the same time to meet the regulator's requirements for reserves and capital adequacy ratios.

In this way - a credit crunch will immediately occur in Asia.

A huge problem was placed before everyone in the conference room.

If Nippon Steel is not saved, it may drag down the overseas ratings of Japanese companies, causing a break in the overseas investment funding chain, which in turn will cause the recession to be transmitted to the domestic market, causing severe economic shocks.

If Nippon Steel is rescued but banks end up with bad debts, it will mean a credit contraction of terrifying scale.

The representatives of the six banks present didn't know what to do.

"Additional loans are a must," Terada said firmly. "There is no room for compromise! I know what your bank is worried about. The central bank will provide you with liquidity support specifically for the Nippon Steel project when necessary, and will open a window to exchange short-term bills with banks."

Will the central bank support it too?!

After hearing this, the bank representatives did not feel relieved, but instead sensed a more serious crisis behind it. Short-term bill swaps refer to the central bank purchasing commercial bank bills, and after a certain period of time, the commercial bank repurchases the bills.

Since the central bank purchases the bills, part of the money is released to commercial banks, making up for the lack of liquidity.

However, the bank representative did not feel relieved because after the maturity, the commercial bank had to buy back the bills!

"If there is no future business plan for Nippon Steel, it is almost impossible for the bank to approve additional loans." Mizuho Bank representative Mizushima said directly, "And what exactly is Nippon Steel going to use the loan of more than 300 billion yen for? Our bank didn't even know that Nippon Steel actually had such a big hole to fill!"

"The difficulties encountered by Nippon Steel are temporary," Terada emphasized again. "The current difficulties in steel sales are mainly due to the tariff measures of the United States. This is due to uncontrollable external factors, not to the competitiveness of our products. As long as we can get through this period, Nippon Steel will definitely have a bright future."

Terada's remarks obviously failed to impress the bank representatives present.

They need concrete plans that are tangible and feasible, not vague visions of the future.

Everyone can speak nice words.

However, such words are of no help in solving the actual difficulties.

Itabashi, the representative of Mitsubishi Tokyo UFJ Bank, took over again, "Minister of Internal Affairs and Communications. We are aware of the proposal for additional loans, and we will report to the bank headquarters. However, if Nippon Steel does not have a feasible plan to turn around its operations in the future, it will be very difficult for our bank to make such a huge additional loan."

"I'm taking action here," said Terada. "We are seeking to introduce new strategic investors to Nippon Steel. While the bank is providing additional loans, the new strategic investors will also inject capital to ensure the balance of the company's assets and liabilities and divest non-performing assets. With the funds from the bank and strategic investors, Nippon Steel will completely get rid of its predicament, be renewed, and take off again in the economic and industrial circles of Japan!"

Terada came up with a great plan.

However, in the minds of the bank representatives, this was an almost impossible plan.

Nippon Steel is already the largest steel company in the country.

Who else can become its strategic investor? !

(End of this chapter)