Olympus ex-CEO to return to Japan, top shareholder cuts stake

TOKYO The former CEO of Olympus Corp, whose revelations about irregular deals and payments exposed an accounting scandal at the camera and medical equipment maker, will return to Japan next week to meet police and authorities investigating the case.

"I'll arrive on Wednesday afternoon," Michael Woodford told Reuters by telephone, adding he expected the Japanese authorities to ensure his safety while in the country.

Woodford, a Briton, fled Japan after being fired on October 14, and said earlier this month he didn't think it would be safe for him to return to the country. The scandal has raised fears, denied by Olympus, that the deals could be linked to "anti-social forces," a euphemism in Japan for organized crime.

Woodford will meet with Japanese police, prosecutors and officials of the Securities and Exchange Surveillance Commission, the Japanese financial market regulator.

Olympus is under investigation after admitting hiding investment losses for decades and using payments linked to acquisitions to aid the cover-up.

Those payments included a $687 million fee paid to obscure financial advisers for Olympus's $2.2 billion purchase of British medical equipment firm Gyrus in 2008. The fee is the world's biggest, according to Thomson Reuters data.

The Nikkei business daily said earlier Olympus may sell assets to help pay down debt under a plan aimed at keeping the support of its banks. Their backing is vital because the firm is relatively highly geared and is expected to have to make some hefty writedowns after its accounts are put straight.

Katsunori Nagayasu, chairman of the Japanese Bankers Association and president of Mitsubishi UFJ Financial Group, the country's top bank, said it was the responsibility of main creditors to show support for a company in trouble.

"But, if a company is found to have problems, like the involvement of anti-social forces, banks are not able to give support," he told reporters.

Olympus released a presentation shown to creditors on Wednesday that included a simulation of how it could cut its interest-bearing debt by a third over 3 years to 408 billion yen ($5.3 billion), and still have cash left in the bank.

SMALLER HOLDING

Olympus' top shareholder, Nippon Life Insurance, has cut its stake in the firm to 5.11 percent from 8.18 percent due to the uncertainties, but will remain an investor as it believes Olympus has a strong core business and technology.

"Our basic stance is that we will continue to support Olympus due to the company's high technological strength in its core business and because it is in the public's interest," said Akira Tsuzuki, an official at Nippon Life.

Olympus, which employs nearly 40,000 people, is the global leader in endoscopes, and its optical technology may have defense applications.

Shares in Olympus, which have lost 70 percent of their value since the scandal broke last month, see-sawed in heavy trade on Thursday, surging by as much as 18 percent then giving up almost all those gains to end 0.95 percent up at 747 yen.

Investors are betting the firm will keep its coveted Tokyo Stock Exchange listing, though executives deemed responsible for the scandal may face criminal charges.

Fumiyuki Nakanishi, strategist at SMBC Friend Securities, said banks were major shareholders as well as lenders to Olympus and none would benefit from a delisting, which would effectively cut the firm off from equity capital markets.

"The big shareholders are the banks. They're the ones that are going to suffer if Olympus shares turn into scrap paper," said Nakanishi, noting Olympus still needed to meet a December 14 deadline for publishing its half-year accounts.

TO DELIST, OR NOT?

Olympus shares are on a watchlist as a possible prelude to delisting, which would be automatic if it misses next month's deadline. The company has reaffirmed it would announce its earnings by that date.

The bourse can still delist the shares depending on the scope of past misstatements. But a securities watchdog source has said it might recommend the company be fined, a move that could decrease the risk of delisting.

"Institutions and funds are selling their Olympus holdings, but as long as the company looks as if it might avoid delisting, hedge funds and speculator traders will keep buying it back, looking for short-term gains," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

But, he added, "the rising trend could turn around quickly" if the company looked like it might miss the deadline.

ANNUAL PROFIT

In a sign that Olympus expects its core businesses to keep ticking over, it showed creditors a tentative operating profit forecast of 35.6 billion yen for the year to March - some way below a previous forecast of 50 billion yen announced in August, but about the same as last year's profit.

Olympus said it may need to erase about 33.4 billion yen ($434 million) in goodwill related to its Gyrus acquisition when it revises past earnings statements. An independent panel commissioned by Olympus is still looking into this.

If this were the only revision, such an amount would put a big dent in the company's equity, but not destroy it.

At Wednesday's meeting, which involved about 100 bankers, two major creditors -- Sumitomo Mitsui Banking Corp and Bank of Tokyo-Mitsubishi UFJ (BTMU) -- said they would continue to support the firm, multiple sources told Reuters.

Olympus' interest-bearing debts were about 650 billion yen ($8.45 billion) on a consolidated basis as of end-March. The two banks have total loans of over 400 billion yen to the firm, which also borrowed about 100 billion yen in syndicated loans, according to banking sources.

($1 = 76.950 Japanese Yen)

(Additional reporting by Mari Saito, Yoko Kubota, Lisa Twaronite, Tim Kelly and Isabel Reynolds in Tokyo; Writing by Linda Sieg; Editing by Mark Bendeich and Ian Geoghegan)