TEPCO asks creditors for uncollateralized loans

TEPCO asks creditors for uncollateralized loans

JAPAN - Tokyo Electric Power Co. has asked its creditor banks to extend uncollateralized loans to the utility from next fiscal year, according to sources.

TEPCO, the operator of the crippled Fukushima No. 1 nuclear power plant, has asked the banks to switch some of its borrowings to uncollateralized loans and provide new loans without collateral, the sources said.

If loans are collateralized, TEPCO is required to prioritize repayments to the banks over compensation payments to people affected by the nuclear crisis at the Fukushima plant. This could spark public criticism that the utility is treating its creditors better than victims of the crisis.

Such criticism could put a damper on government plans to increase aid to TEPCO through such measures as further injections of public funds.

TEPCO intends to include specifics of its request to financial institutions in a turnaround plan scheduled to be drawn up by the end of the month, the sources said.

However, the banks remain cautious. TEPCO is expected to discuss the matter with its creditors, but the outcome of the talks could affect the company's future funding.

Before the Great East Japan Earthquake triggered the nuclear crisis, TEPCO had been able to obtain unsecured loans from financial institutions thanks to its high credit ratings.

But because the crisis has significantly deteriorated the utility's balance sheet, the company has been unable to issue corporate bonds. Currently, loans from financial institutions are the firm's financial lifeline.

The financial institutions extended about ¥2 trillion in emergency loans to TEPCO in March 2011, but a spike in its debts became an issue. TEPCO and its creditors then agreed to convert part of the loans initially extended to the company without collateral into privately placed bonds that are collateralized.

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