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Coronavirus

Japan pub operator Watami lands $90m in first test of state aid

Development Bank of Japan program aims to help restaurants adapt to pandemic

Watami, one of Japan's biggest pub chain operators, is expected to report a net loss of 11.6 billion yen for the year ended March. 

TOKYO -- Watami, one of Japan's biggest restaurant operators, is set to receive about 10 billion yen ($92.5 million) in financing from the Development Bank of Japan as the company seeks to change its business model and adapt to the new normal, Nikkei has learned.

The state-backed DBJ launched a program last month to support larger companies having at least 1 billion yen in capital in the coronavirus-ravaged restaurant and hotel industries. Watami is the first known borrower of the new scheme.

Subordinated loans and other types of financing for Watami, expected as early as mid-May, comes as Tokyo, Osaka and other areas prepare to go under another state of emergency from Sunday through May 11 to fight a surge in COVID-19 cases.

Coronavirus restrictions have dealt a severe blow to Watami's chains of izakaya pubs, which before the pandemic used to be popular after-work dining spots. For the January-March quarter, same-store sales at its domestic food service business tumbled by half from a year earlier. The company is expected to report a net loss of 11.6 billion yen for the year ended March.

To lift sales outside of the izakaya business, on which it was founded, Watami is transforming about 120 of its 330 pubs under several brands such as Torimero and Miraizaka -- whose menus feature chicken dishes -- to yakiniku grilled beef restaurants. The business makeover plans also call for increased openings of fried chicken eateries.

Watami issued new shares in March to raise about 1 billion yen in fresh capital. It is now procuring more funds through subordinated loans and preferred shares. Subordinated loans are generally considered part of capital in bank screenings and thus help shore up borrowers' financial standings -- making it more likely that they will receive ordinary loans.

Bank support has so far mostly been no-collateral and no-interest loans for financing everyday operations. With restaurants and lodging businesses continuing to incur deep losses amid the prolonged pandemic, the DBJ is now providing capital-type loans.

Under the new program, subordinated loans will come with interest rates of 1% for an initial three years, rising to 3% thereafter.

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