Japan's Orient Sees $4 Billion Loss, Needs to Raise Capital

Japanese consumer lender Orient said it sees its annual net loss ballooning to $4 billion on provisions to repay interest charges deemed illegally high, and would ask its main bank and others for new capital.

To avoid falling into negative net worth, Orient said in a statement on Tuesday it was asking Mizuho Corporate Bank for a debt-equity swap worth 140 billion yen.

It is also asking the Mizuho Financial Group, trading house Itochu and the Development Bank of Japan to help provide a combined 150 billion yen in capital.

Orient, which issues credit cards and provides short-term personal loans, has also asked Mizuho to make it a group firm.

Orient said it now expected its net loss for the business year ending March 31 to come in at 457.9 billion yen ($4 billion), compared to an earlier estimate of 39.2 billion yen.

Its recurring profit estimate was also cut by 64% on higher costs relating to the repayment of loans.

Orient and other non-bank money lenders have been hit by a flood of demands from borrowers to repay interest charges deemed by courts to be illegally high.

The interest charges disputed by Orient clients were levied on loans with rates set between 20 and 29%, formerly a grey zone between two conflicting lending laws.

Japan's parliament eliminated the grey zone in December by unifying the rate ceiling at 15 to 20%, depending on the size of the loan.