Kenwood 2004 Annual Report Download - page 17

New Financial Strategy—Rebuilding a sound financial
base฀
Aiming at achieving the goals of the "Excellent Kenwood Plan," the Company
devised and carried out a pioneering program referred to as the "New Financial
Strategy," which includes a simultaneous execution of four measures that is
unprecedented in Japan, "elimination of losses carried forward through capital
reduction without compensation," "retirement of preferred stock through public
share offering," "debt refinancing through syndicated loans" and "termination of
the financial agreement."฀
฀
"Elimination of losses carried forward through capital
reduction without compensation"฀
With the completion on 6th August 2004 of nominal capital reduction totaling
20.0 billion yen without compensation, the Company eliminated both of its
consolidated and non-consolidated losses carryforward which had posted a
major challenge to the Company. This paved the way for resumption of dividend
disbursement and led to a significant improvement in its financial foundation.฀
฀
"Retirement of preferred stock through public share
offering"฀
The Company on 1st July 2004 completed the capital increase of 23.0 billion yen
through the issuance of new shares, procuring 22.0 billion yen from domestic and
overseas markets. On 6th August the Company completed a capital reduction
with compensation, paying back 16.1 billion yen, from the raised funds, to
Resona Bank, the holder of the First Tranche of Class-A Preferred Stock, realizing
an above-par redemption. As a result, the Company retired the First Tranche of
Class-A Preferred Stock, representing half of all the preferred stock it had issued,
significantly reducing the impact of any future dilution of shareholder value.฀
฀
"Debt refinancing through syndicated loans" and
"Termination of financial agreement"฀
The Company eliminated its losses carryforward that had posted a major
challenge and retired half of the preferred stock it had issued, through public
share offering on 1st July 2004 and capital reduction with and without
compensation on 6th August 2004. As a result, it became possible for the
Company to organize a new syndicated loan (including commitment line contracts
with a number of financial institutions), and the Company concluded a new
syndicated loan agreement of 40.0 billion yen on 23rd August with Resona Bank
and Mitsubishi Trust and Banking Corp. acting as co-arrangers.
With the funds made available from this new syndicated loan and the
utilization of its own cash reserves, Kenwood completed the refinancing of
existing bank borrowings effective 31st August, and became autonomous in
terms of its financial strategy by terminating existing financial accords with
various financial institutions in a constructive manner one year ahead of
schedule, a major step toward realizing "zero net-debt business management"
targeted under the medium-term "Excellent Kenwood Plan" by substantially
reducing interest-bearing debts, and thus completed a series of "New Financial
Strategies."฀
฀
฀
󰒄2004/3 󰒆Capital Reduction󰒅Offering
Elimination of losses carried forward through capital reduction without compensation / Retirement of preferred stock through public share offering
(Billions of yen)
70
0
20
10
30
40
50
60 18.1
1.9
22.0 20.0
Capital increase
through public
share offering
Capital reduction
without
compensation
16.1
Capital reduction
with
compensation
Capital
39.5
Others 3.4
Cumulative
Loss฀
18.1
Shareholders'
Equity฀
24.7
Cumulative
Loss฀
18.1
Shareholders'
Equity฀
46.7
Capital
50.5
Paid-in
Capital
11.0
Others 3.4
Shareholders'
Equity ฀
30.6
Capital
14.4
Redemption
of Class-A
Preferred
Stock฀
16.1
Elimination of
cumulative
loss
18.1
Paid-in
Capital฀
12.8
Others 3.4
Kenwood Corporation 17