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Mitsubishi jet developer to raise $1.8bn to tackle excess debt

Proceeds will go partly toward the goal of making 2020 delivery

Five delays and ballooning costs have left the Mitsubishi Regional Jet's developer with negative net worth of about $980m.
Delay after delay and ballooning costs have left the Mitsubishi Regional Jet's developer with a sizable negative net worth.   © Kyodo

TOKYO -- The company behind the Mitsubishi Regional Jet aims to increase its capital by about 200 billion yen ($1.79 billion) to eliminate its negative net worth and fund the project, seeking a firm footing as it gears up to deliver the first plane in mid-2020.

Mitsubishi Aircraft would seek the funds largely from parent Mitsubishi Heavy Industries in order to pay it back. About 120 billion yen of the fresh capital would go toward paying down debt to Mitsubishi Heavy under a method similar to a debt-for-equity swap, with the parent paying the unit cash that then goes toward debt repayment. The other 80 billion yen would go toward development and other costs.

The MRJ developer, headquartered in Japan's Aichi Prefecture, aims to eliminate its negative net worth this fiscal year. It finished the year ended March with 110 billion yen in debts in excess of assets -- more than double the previous year's figure.

Mitsubishi Heavy owns more than 60% of its consolidated subsidiary, which has about 100 billion yen in capital including reserves. Details including how the capital increase will be divided between Mitsubishi Heavy and other major shareholders, such as Toyota Motor and trading house Mitsubishi Corp., have yet to be settled. No new shareholders are expected to be added.

The MRJ made its first air show demonstration flight in the U.K. this July. Delivery has been repeatedly postponed.

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