Mitsubishi Motors Debt Paid as Stock to Creditors

TOKYO, May 19, 2004; Reuters rported that two of Mitsubishi Motors Corp's creditors in the Mitsubishi group will decide as early as Wednesday to swap 130 billion yen ($1.14 billion) of debt owed by the auto maker into equity, Mitsubishi group sources said.

The Bank of Tokyo-Mitsubishi (BTM) and Mitsubishi Trust & Banking Corp, both part of the Mitsubishi Tokyo Financial Group (MTFG) (Tokyo:8306.T - News), have outstanding credit of under 200 billion yen to Mitsubishi Motors (MMC), Japan's only loss-making auto maker.

BTM will swap 90 billion yen and Mitsubishi Trust will exchange 40 billion yen of debt for equity to help MMC restructure, the sources said.

The Mitsubishi group, led by Mitsubishi Heavy Industries, Mitsubishi Corp and BTM, has been working on a revitalisation plan for MMC over the past month after a sudden decision by DaimlerChrysler AG to abandon a multi-billion-dollar rescue plan.

MMC, owned 37 percent by the German-American auto maker, is scheduled to announce on Friday details of the new plan, which is expected to include a 450 billion yen bailout package and steps to restructure loss-making operations.

Japan's fourth-largest auto maker is struggling to rebuild itself after a disastrous policy of extending easy car loans in the United States backfired, resulting in huge losses.

For the business year that ended in March, MMC has forecast a net loss of 72 billion yen. It will announce results and forecasts for this year on Friday.

MMC's shares gained 2.56 percent to 240 yen in morning trade, compared with a 1.73 percent rise in the Nikkei average. MTFG was up 5.28 percent at 917,000 yen.