ETIC to Provide Support to Joypack KK.
September 29th, 2011
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Joypack KK. under Article 25, Clause 4 of the Enterprise Turnaround Initiative
Corporation of Japan Act (Act 63, of 2009, hereafter “the ETIC Act”).

1. Name of persons or companies concerned
Joypack KK. (hereafter, “Joypack”)
2. Name of financial institution jointly applying for rehabilitation support with Joypack
Kiyo Bank, Ltd. (hereafter “Kiyo Bank”)
3. Outline of business revitalization planPlease see appendix
4. Comments from State Ministers in charge of ETIC
Prime Minister, Minister of Internal Affairs, Minister of Finance, Minister of Economy,
Trade and Industry: No opinion expressed
Minister of Health, Labour and Welfare: “I have no objection to the decision to support
Joypack. However, I ask that after reaching the decision to support, ETIC should
encourage Joypack to discuss the situation with employees as soon as possible. I also
ask that in advising on and guiding the implementation of the corporate revitalization
plan, ETIC should aim to ensure that Joypack complies with related laws andregulations, and that the company also provides adequate opportunities for substantive
discussions with the workforce with due consideration of employment stability and othersuch factors.”
5. Comment from State Minister supervising business activities
Minister for Agriculture, Forestry and Fisheries: “I have no objection to the decision to
support Joypack. Joypack contributes to stable beverage supply in the Kansai region,and in implementing the business revitalization plan I ask that appropriate
consultation takes place with regional stakeholders with regard to beverage supply

stability and employment security.”
6. Debt purchase application period
From Thursday, September 29th, 2011 for receipt by ETIC no later than Thursday,
November 24th, 2011
*Under this agreement, no debt purchasing will take place. Accordingly the stated debt purchase application
period refers to the amount of time to agree on the control and disposal of debt in accordance with thebusiness revitalization plan (Article 26, Clause 1, Paragraph 2 of the ETIC Act).

7. Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, the financial institutions have beenrequested not to recover loans or exercise any other rights they may have as creditors
before the end of the debt purchase period as per item 6 above.
8. Treatment of trade and general creditors
The decision by ETIC to provide support involves requesting financial support only fromthe financial institutions providing loans to Joypack. No request for support will be madewith regard to trade debt. Therefore there will be no impact on trade and generalcreditors.
9. Basis for decision to support
ETIC’s basis for deciding to provide support is as follows.
9.1

Rationale

Based in Kainan City, Wakayama Prefecture, Joypack is a beverage bottler
commissioned by food companies and other companies in the same industry, tomanufacture private-brand beverages such as green tea, and is a member of the
Cooperative Association for Small and Medium-sized Private-brand Bottlers. Joypack
is essentially the only 2-liter PET bottler in the Kansai region, and it therefore can besaid that Joypack’s existence is essential to maintaining the supply of private-brandlarge-sized PET bottle products in Kansai. If Joypack were to collapse, the stablesupply of low-cost and trusted large-sized PET bottles would become difficult, causing
a significant effect on consumers.
Moreover, Joypack operates a factory in a mountainous area of Wakayama Prefecture,
an area where few companies provide employment. In providing support to Joypack,the employment of current personnel can be secured, and more jobs are expected tobe created in accordance with future plans to shift to a 24-hour operational structure toimprove operational capacity.
Joypack is able to take maximum advantage of a rich and high-quality Wakayama
Prefecture water source, which is highly valued in the Kansai region, and by providing
support to Joypack, ETIC will also help to stimulate local industry, including othercompanies in the same industry who use the water source.
The method of support used in this particular scheme will be a management
employee buyout (MEBO), and it is believed that supporting initiatives to establish an
independent management structure with a local management focus, will provide afuture direction for small to medium-sized companies struggling with succession
issues.
Moreover, supporting initiatives which aim to achieve a steady acquisition of orders for
low-cost high-quality private-brand beverages while developing mutual relationships
within the cooperative association network, provides one future direction in the eventof revitalizing small to medium-sized companies
9.2 Role of ETICIn deciding to support Joypack, besides being actively involved in the development of
the business revitalization plan, ETIC will promote smooth progress of therevitalization plan, by coordinating activities which Joypack would have found difficult
to execute alone. EITC will not conduct financing, capital injection, or a buyout in thisparticular scheme.

EndsAppendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support
1.1 Names of companies
Joypack KK. (hereafter, “Joypack”)
1.2

Main businessOutsourced manufacturer of soft drinks (green tea, coffee, tea, fruit juice, vegetablejuice, and functional beverages)

1.3

Main facilities
Head Office711-1 Hataya, Nanayama, Kainan City, Wakayama

Prefecture
Factory/warehouse
1.4

As above

Number of employees
Head office:6

Factory/warehouse:

23

Total:

29(Includes two part-time employees)

1.5

Labor union
No labor union exists

1.6

Main banks
Kiyo Bank; Shoko Chukin Bank

1.7

Financial overview (financial results for year ended September 2010)
Net sales¥868 million

Operating income before amortization-¥11 million

Section 2: Background and circumstances leading to request for ETIC support
Joypack was established in April 1991 by the general construction company
Maruyamagumi. Co., Ltd. as a filling factory for mandarin orange juice sold by one of its
main customers at the time. Following its establishment, Joypack received acomparatively steady volume of orders from its main customers, and recorded an
appropriate level of profit. However, order volumes gradually began to decline from2003. From 2005 in particular, changes in the soft drink manufacturing industry and theenvironment surrounding Joypack had a major effect on both Joypack and its maincustomers, and in 2007 Joypack lost its contract with a main customer, and was forced
to temporarily freeze operations.

Joypack decided to utilize its business resources, including its high quality control
capabilities cultivated from its production of national brand products, its high capacity
bottling facilities and its rich and plentiful water source, to implement business
revitalization through downsizing. In order to find a successful direction for its private
brand products business, Joypack became a member of the Cooperative Associationfor Small and Medium-sized Private-brand Bottlers which improved the prospects ofsecuring a fixed volume of orders from association members, and allowed it to resume
operations from April 2008.
After operations resumed, Joypack focused on acquiring orders from customers outside
the cooperative association, and sales gradually increased from year to year. Acquiring
orders was priority, and Joypack would often accept orders for low profit-margin
products or summer-only spot orders. Although Joypack was not making a profit, its
deficit margin narrowed from year to year, and it has now reached a stage where it canbegin to make a recovery.
From a financial standpoint, almost the entire amount of funding needed for capital
investment at the time of establishment was procured through loans. The
abovementioned changes which occurred in the business environment caused animbalance which led to the accumulation of an excessive amount of debt in relation tobusiness scale. Moreover, due to the termination of a contract with a main customer atthe time, Joypack’s business results declined significantly. At the same time, a drop in
real estate prices enlarged its actual net liabilities and lowered its collateral value. As aresult, Joypack fell into deep financial difficulty, and to this day has been unable toimplement any fundamental measures to improve its financial condition.
In terms of management and organization, Joypack terminated the employment all of itspersonnel following the freeze of operations in 2007. When operations resumed it
rehired the minimum required personnel, and now continues to maintain a very leanstructure. All employees under the president are now focused on the acquisition of new
customers, and the company has finally found some direction.
As such, Joypack is currently at a stage where it is starting to see a path to recovery
from a business and organizational standpoint. However, financial support is essential

for Joypack to make progress with its recovery. Accordingly, Joypack, after discussions
with Kiyo Bank, resolved to apply for support from ETIC.
Section 3: Outline of business revitalization plan
1. Basic policy
The plan will focus on fundamentally rectifying the business, financial and organizational
issues faced by the company. The basic policy of this plan is to take maximum advantage of
2L PET bottle production capacity, to improve operational efficiency and secure steadyrevenue, and continue to maintain high quality soft drink production and supply capabilities.
Specific details are as follows.
(1) Improvement of profitability
Profitability will be improved through restructuring of management and production
structure, cost cutting, and improvements to processing costs.
(2) Acquisition and expansion of sales
Efforts to improve sales will be made by securing year-round products, developing new
business channels, and reinforcing the future production framework.
2. Business restructuring (structure)(1)

MEBO through second company method
The new management team and personnel will establish a new Joypack preparationcompany (hereafter “New Company”), and implement a company separation(absorption separation) wherein all the assets and liabilities pertaining to theoperations of its head office factory and others are transferred to the New Company
for continued operation. After the company separation Joypack is scheduled to go
into liquidation proceedings (second company method).

(2)

Request for financial support
Of the ¥1.95 billion owed to financial institutions by Joypack, financial support ofapproximately ¥1.24 billion will be requested from financial institutions.

(3)

Financing
Financing of the business is expected to be sufficient, provided that financial support
is received in line with the business revitalization plan, along with seasonal financing
and the capital injection from ETIC.

Section 4. Conformance with standards for support
1. Requirements related to standards of support

(1) Useful business resources
Joypack is the largest PET bottling firm in the Kansai region private-brand beverages
market. In addition to possessing a valuable mineral water source, Joypack has one of
only a few high-speed filling facilities in the Kansai area. It retains high quality control
capabilities cultivated from its production of national brand products, and accordingly
possesses longstanding useful business resources.
(2) Excessive debt
Joypack bears excessive debt in relation to its profit earning capacity, to the point
where it is necessary for it to receive financial support in order to conduct business
revitalization, through MEBO.
2. Factors confirming potential for business revitalization(1) Agreement of main creditors
Joypack made a joint application for support with core creditor Kiyo Bank.
(2) Standards for productivity improvement
The required standards for productivity improvement are expected to be met throughthe implementation of this business revitalization plan.
(3) Standards for financial soundness
The required standards for financial soundness are expected to be met through theimplementation of this business revitalization plan.
(4) Comparison with liquidation value
The liabilities expected to be recovered through the execution of this business
revitalization plan exceed the estimated liabilities that could be recovered fromconducting bankruptcy proceedings.
(5) Potential to refinance within three years
ETIC will not conduct financing, capital injection, or a buyout in this particular
scheme.
(6) Connection with structural oversupply
Under the business revitalization plan, there will be no attempt to increase thesupply capacity of Joypack. Accordingly, the plan has been judged as not hindering
the resolution of structural oversupply as specified in Article 19 of the Act on Special

Measures for Industrial Revitalization.
(7) Status of consultation with workforce
Although there is no labor union at Joypack, it is planned that meetings with labor
union

representativesand

employees

willbescheduled

promptly

after

announcement of the decision to provide support, and opportunities provided todiscuss aspects of the business revitalization plan, along with employment andworking conditions.
Section 5. Responsibility of management and investors
1. Responsibility of management(1) Following the approval of the business revitalization plan, the company separation
will be conducted and Joypack will go into liquidation proceedings. Following theconclusion of liquidation proceedings, all executive staff will forfeit their positions asexecutive officers. Moreover, executive staff of Joypack will not become executiveofficers of the new company.
(2) Removal of right of claim for retirement benefits for executive officers
All rights of executive officers to claim for retirement benefits will be removed.
2. Responsibility of investors
Under the liquidation proceedings, shareholders of Joypack will not receive any distributionof remaining assets, and will effectively have all their shares cancelled.
Ends