Japan's Urban fails with debt of 255b yen

August 14, 2008
Japan's Urban fails with debt of 255b yen
Property firm cites difficulty in raising finance due to global
credit crunch

(TOKYO) Japanese property developer Urban Corp yesterday failed with
debt of 255.8 billion yen (S$3.3 billion), caught by the global
credit crunch in the biggest collapse by a listed Japanese company in
six years.

The apartment and shopping mall developer was the latest in a string
of Japanese real estate firms to fold as banks rein in lending to
small and medium-sized developers seen at risk as the the world's No
2 economy flirts with recession.

Japanese property shares have crunched lower this year as fear of
bankruptcy has spread, although the biggest developers with more
robust financing have used the tough times as an opportunity to go
bargain hunting.

Urban said in a statement that it had had growing difficulty in
raising finance since late last year due to the global credit crunch,
while a slowing economy saw it struggle to sell properties.

The company said it had sought a new partner to help it through the
cash crunch but alliance talks had failed.

Hiroshima-based Urban's shares have lost 95 per cent of their value
this year.

Investors have become increasingly fearful about the financial health
of the Japanese property sector since developer Suruga Corp fell into
bankruptcy in June after it failed to secure new financing from
banks.

Tight financing sent fellow developer Zephyr Co to seek court
protection last month with US$893 million in debts, prompting fears
the problems were spreading.

On top of the financing squeeze, developers have been caught by
soaring energy and raw material costs.

Urban's collapse, the largest by a listed Japanese company since
financial firm First Credit Corp fell in 2002 with 260.5 billion yen
in debt, will turn even more investors off the sector, analysts said.

'Banks seem to be taking a more strict attitude in their lending to
property firms. I would not be surprised to see more (collapses),'
said Fumiyuki Nakanishi, head of investment information department at
SMBC Friend Securities.

'Urban has been said to be a winner in the industry. If today's Wall
Street falls, it will be a double whammy to the Tokyo market
tomorrow. I think there will be an Urban shock in the market
tomorrow,' Mr Nakanishi said.

Urban's shares closed down 1.6 per cent at 62 yen ahead of the
announcement, giving it a PBR (price-book value ratio) of 0.13 and a
market capitalisation of about 14.3 billion yen.