NABC Chapter 25 Whitestone Financing Meeting
Chapter 25 Whitestone Financing Meeting
The meeting began.
Masakazu Yamada reported first:
"Shiraishi Refrigeration Co., Ltd. has applied for 500 million yen. The funds will be used in four parts: First, to replace the 90 million yen loan from Osaka Credit Bank; Second, to upgrade the cold storage compressor units and temperature control system, estimated at 90 million yen; Third, to reorganize the equity and adjust the capital policy, approximately 320 million yen; Fourth, to supplement working capital."
He turned a page.
"According to the on-site investigation, Shiraishi Refrigeration is still operating normally. The Dojima Cold Storage warehouse ships an average of 300 to 400 boxes per day, and its main customers are department stores, hotels and food companies in Osaka. The cold storage equipment shows signs of aging, the No. 2 compressor unit has an overload alarm, and the electricity cost has increased by about 15% compared with the same period last year."
Chihaya Yuri continued:
"Regarding shareholding, Takao Shiraishi holds 28% of the shares, which has been pledged to a financing company affiliated with Daiwa Securities. The deadline is 3 PM on May 2nd. According to President Seiji Shiraishi, Kansai Urban Development has provided Takao Shiraishi with 30 million yen in funding, nominally a short-term working capital loan, but it may actually include a purchase option or a penalty clause."
No one spoke in the meeting room.
Everyone could tell that this was no ordinary loan.
Masakazu Yamada concluded by saying:
"Initial assessment suggests that Shiraishi Refrigeration's operations have not deteriorated to the point of being unsustainable, but there is a risk that control could be seized by an external developer. If Kansai Urban Development acquires Shiraishi Takao's shares and further seeks to acquire shares from Morikawa Industries and his family, Dojima Refrigeration may be disposed of as an asset."
The document was closed.
The meeting room fell silent.
Takahiro Matsumoto did not immediately respond.
He looked at Kiyomasa Ogaki.
"Minister Ogaki, what's the Finance Department's opinion?"
Kiyoshi Ogaki was holding a teacup, as if he had known all along that this question would eventually fall on his head.
He slowly put down his teacup and glanced at Iwakura Tsuyoshi.
"Regarding risks, the debt management department knows best, Iwakura-kun, you go first."
In short, the right to speak fell to Tsuyoshi Iwakura.
Iwakura was not surprised at all.
He opened the folder in front of him, pressed his finger on the equity structure page of Baishi Refrigeration, and said clearly and decisively:
"I disagree."
Kiryu Yaya raised his eyes.
Takeshi Iwakura made his opinion clear:
"This financing is too risky."
"First, the use of funds is impure. Ostensibly it's for business stabilization and equipment upgrades, but in reality, over 300 million is intended for the defense of the Baishi family's equity. Banks are not tools for family businesses to fight for control."
"Secondly, guarantees are not absolutely safe. The Dojima Cold Storage was valued at 1.4 billion in the past, but that was during the bubble era. Now land prices have begun to decline. Even a conservative liquidation of 650 million is just a figure on paper."
"Cold storage buildings are not ordinary office buildings. There are uncertainties regarding disposal costs, the scope of buyers, and changes in use."
"Third, the execution risks are too great. The cancellation of the mortgage on the Osaka Credit Cooperative, the release of the pledge on the Daiwa Securities-affiliated financing company, the change of the name of Shiraishi Takao's shares, the possible release of the pre-sale right, and the establishment of our bank's first-priority guarantee all need to be completed before Golden Week."
"If any link in the chain goes wrong, the funds will be stuck halfway."
He paused for a moment after saying this:
"More importantly, the Kansai urban development project has already begun. Kuroda Shuichi is no ordinary speculator. The fact that he dared to pay 30 million yen in advance means there must be a contract behind it. If we get involved now, it's like putting ourselves directly in opposition to him."
"I don't think Mitsubishi Bank should take such a risk because of the internal strife within the Shiraishi family."
The meeting room fell silent.
What Iwakura Takeshi said was very realistic.
That sounds like something someone in a debt management course would say.
He doesn't care what ideals entrepreneurs have, nor does he care how many employees' lives Baishi Refrigeration provides.
He only looks at how bad debts will eventually occur and what the probability of them happening is.
According to Takeshi Iwakura, many non-performing loans initially have a seemingly plausible story behind them.
The company itself is fine; it's just experiencing temporary cash flow difficulties. As long as the bank provides support again, it can get back on its feet.
In the end, however, the issues of guarantee disposal, litigation, and debt collection will still fall on the shoulders of the debt management department.
Masakazu Yamada pondered for a moment.
"The business is indeed not bad. Shiraishi Refrigeration's revenue has remained stable at around 1.6 billion yen for the past three years, with an operating profit of 110 million yen and a recurring profit of 80 million yen. Currently, it has about 290 million yen in bank loans, so its debt level is not heavy."
He paused.
"But Section Chief Iwakura is right, the risks associated with equity and execution are very high."
Chihaya Yuri stared at the table without saying a word.
She knew that at this point in the meeting, without any new assessments, the case involving Shiraishi Refrigeration would most likely be suppressed.
She sighed and didn't say anything more.
At that moment, Matsumoto Takahiro suddenly looked at Kiryu Yaya.
"Kiryu-kun."
"Yes."
What do you think?
Several pairs of eyes fell on them simultaneously in the conference room.
Takeshi Iwakura also glanced at him.
There was no disdain in his eyes, but there was no expectation either.
A newcomer.
I've only been working here for less than a month.
It's rare to see problems with Fuji Metal these days.
However, the 500 million yen control risk financing and the 30 million yen fraudulent loan are not the same thing.
Kiryu Yaya straightened up a bit.
He didn't rush to refute Iwakura Tsuyoshi, but instead gave a slight bow.
"I believe Section Chief Iwakura's judgment is correct. If this is merely an internal power struggle within the Shiraishi family, Mitsubishi Bank should not get involved."
Takeshi Iwakura's eyebrows twitched slightly.
Kiryu Yaya continued:
"But I believe that the Shiraishi Refrigeration incident is not just a matter of internal family conflict."
The meeting room became even quieter.
Kiryu Yaya opened the folder in front of him and turned to the page with the business data.
"First, look at the business itself."
"Shiraishi Refrigeration's revenue over the past three years was 1.58 billion, 1.63 billion, and 1.61 billion yen, respectively. Operating profit has remained above 100 million yen, and the accounts receivable collection cycle is around 40 days with no significant delays. There are no large bad debts from major customers."
"In other words, the problem with Whitestone Refrigeration is not operating losses, nor has its cash flow collapsed."
He paused.
"The problem stemmed from Takao Shiraishi's failed personal speculation, which triggered a share pledging crisis. The company itself still has the ability to repay the debt."
Iwakura Tsuyoshi did not speak.
Kiryu Yaya flipped to the equipment information.
"Let's look at equipment updates."
"The No. 2 compressor unit of the Tangdao Cold Storage has triggered an overload alarm, and its power consumption has increased by about 15% compared to the same period last year. The outbound volume of the Shiraishi Refrigeration unit has not increased accordingly, and the door seal was replaced last year, so the abnormal power can be basically judged as a decrease in the unit's efficiency."
"Cold storage equipment is different from ordinary manufacturing equipment. If a regular machine tool is down for a day, it means one less day of production. If cold storage equipment malfunctions, it can result in damage to customer goods or even a collapse of contractual credit."
He looked at Tsuyoshi Iwakura.
"The replacement of 90 million units of equipment is not a fabricated excuse, but a genuine necessity."
Iwakura nodded slightly.
Kiryu Yaya continued:
"If we calculate based on a principal repayment of 500 million yen, a ten-year term, and equal payments per yen, the annual principal repayment would be approximately 50 million yen. Based on current interest rates, the interest in the first year would be around 30 million yen. The total would be approximately 80 million yen."
"White Stone Refrigeration's operating cash flow over the past three years has been approximately 120 million to 130 million. After the equipment upgrade, electricity and maintenance costs are expected to decrease by 10 million to 15 million annually."
"The repayment pressure is not easy."
"But it's not that there's no way to break even."
He did not describe Whitestone Refrigeration as a perfect customer.
This, in turn, made the people in the meeting room listen even more attentively.
Kiryu Yaya flipped to the customer transaction details.
"Thirdly, and this is what I consider the most important point."
"Whitestone Refrigeration is not an isolated company."