November 19, 2013 / 11:17 AM / in 4 years

Tepco to seek $2 billion in private-placement bonds from lenders: sources

Tokyo Electric Power Co's (TEPCO) President Naomi Hirose speaks to the media in front of a photo showing the tsunami-crippled TEPCO's Fukushima Daiichi nuclear power plant after a meeting of the Contaminated Water and Tank Countermeasures Headquarters, at TEPCO headquarters in Tokyo September 13, 2013. REUTERS/Toru Hanai

TOKYO (Reuters) - The operator of the crippled Fukushima nuclear plant, seeking to revive its finances, will receive $2 billion in funding from its lenders via private-placement bonds, a step that will offer greater protection to creditors, people familiar with the situation said on Tuesday.

Tokyo Electric Power Co (9501.T) and major banks and insurers have agreed on placing the collateralized bonds - whose repayment takes priority over loans in the event of bankruptcy - around the end of the year, the sources said.

The embattled Tepco is working on a reorganization plan to win financing from creditors and to fend off more drastic proposals, including possibly dragging the company through bankruptcy in return for a publicly funded clean-up and shutdown of its Fukushima reactors.

The utility, which faces the decades-long, multibillion-dollar task of decommissioning Fukushima, has been making efforts to win over its creditor banks and insurers to the unpopular cause of financing the company.

Hoping to secure 500 billion yen ($5 billion) by the end of the year from the government and lenders such as Mitsubishi UFJ Financial Group (8306.T), Tepco plans to shed more than 1,000 jobs, some 3 percent of its workforce, via voluntary retirements by the second half of 2014, sources close to the situation told Reuters over the weekend.

Of that financing, the government-owned Development Bank of Japan DBJPN.UL will provide 300 billion yen, sources have told Reuters.

The remaining 200 billion yen ($2 billion) will take the form of the bonds subscribed by MUFG, Mizuho Financial Group (8411.T), Sumitomo Mitsui Financial Group (8316.T), Sumitomo Mitsui Trust Bank (8309.T) and insurers such as Nippon Life Insurance Co NPNLI.UL and Dai-Ichi Life Insurance Co (8750.T), people familiar with the situation said on Tuesday.

Representatives for Tepco and the seven lenders declined comment.

Tepco, Asia’s largest power company, had 4.30 trillion yen outstanding in utility bonds, debt backed up by its massive generation and transmission assets, including 815.5 billion yen in privately placed bonds at the end of September.

The company had no private-placement bonds before the March 2011 earthquake and tsunami, which knocked out the Fukushima plant and rendered Tepco unable to sell debt to the broader bond market. It has since been converting tranches of the 1.9 trillion yen in emergency, uncollateralized financing it received from lenders into private-placement bonds.

But some politicians, such as Kouta Matsuda of the opposition Your Party, have criticized the private subscriptions as preferential treatment for the banks compared with other bondholders. Some politicians are calling for banks to bear some burden in reviving Tepco, as it has been tapping the general public through further taxpayer-funded bailouts or rate increases.

($1 = 100.0350 Japanese yen)

Additional reporting by Kentaro Hamada and Taiga Uranaka; Writing by William Mallard; Editing by Ian Geoghegan

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