TOKYO -- Japanese megabanks and regional lenders are expected to take a major hit from Takata's downfall as the air bag maker's 767 creditors begin to assess damage from the largest manufacturer bankruptcy in history.
The big creditors
A list of Takata's creditors revealed Tuesday shows the company's liabilities reaching 141.2 billion yen ($1.26 billion) The U.S. government is the top creditor, with a claim to 41.5 billion yen. Japanese automakers and domestic financial institutions are also owed large amounts.
Takata and the U.S. Department of Justice agreed in January that the company at the center of a massive automotive recall shall pay roughly $1 billion in compensation. About $850 million of this sum -- earmarked for automaker compensation -- has yet to be paid at all. Filing for bankruptcy does not exempt Takata from paying up debt to the public sector.
Meanwhile, the company has begun notifying suppliers and other essential business partners that existing repayment terms will be honored -- pending court permission.
Other creditors will be forced to swallow repayment rates to be set under a court-led turnaround plan being drawn up. No. 2 creditor Toyota Motor is owed 26.6 billion yen, according to Takata's estimates. But the automaker has estimated a vastly higher 570 billion yen for costs of air bag recalls. Other carmakers like Honda and Nissan Motor said Monday they may not be able to recover the recall costs. Total liabilities could swell as negotiations move forward. The wide gap in debt claims stems from disagreements over the scope of Takata's responsibility.
Losses await banks
Japanese financial institutions account for half of the top 10 creditors and 13 all together, with total claims reaching around 35.5 billion yen.
Takata's borrowings were not backed by collateral, so the default would incur lenders real losses. The impact will be particularly pronounced for regional banks. Aomori Prefecture-based Michinoku Bank, for instance, has said its 1.25 billion yen loan may be unrecoverable or its repayment will be delayed. Takata has no plants in Aomori, but Michinoku took part in syndicated loans organized by major banks. The bank says the earnings impact should be small, but uncertainty remains.
Some banks closed Takata's deposit accounts after the company filed for bankruptcy. Depending on how much of the liabilities are covered by the deposits, the impact could change.
Japan's major banks claim they have already put aside enough loss reserves to absorb the impact, and additional costs will be minimal.
A bitter farewell
Takata held its shareholders' meeting Tuesday, ahead of its scheduled desilting July 27.
The meeting kicked off with the management team bowing deeply in apology, led by Chairman and CEO Shigehisa Takada.
The team had repeatedly rehearsed their part for the meeting, according to a Takata insider, so the first hour went smoothly.
But tensions grew. One investor asked Takada -- who has already promised to resign -- if he was willing to contribute personal assets like his home and real estate, leaving the CEO stumbling to respond. He appealed for support from deputies standing in the back of the room and said the meeting should prioritize questions on motions awaiting approval.
But investors kept grilling the management, asking why Takata will be sold to a Chinese rival at a cut-rate price and suggesting that the board should be revamped. Some even yelled that the top executives should speak more clearly at the meeting.
When asked whether Takata shares will retain even 1% of their value, the management answered that no value will remain if the company slips into negative net worth due to recall costs.
Takata shares resumed trading Tuesday, following a suspension Monday. The news of delisting in about a month ignited selling, pushing down the stock 31% from Friday to the limit low of 110 yen.