ETIC to Provide Support to Corona Industries Ltd.
May 20th, 2011
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Corona Industries Ltd. 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 company concerned
Corona Industries Ltd. (hereafter “Corona Industries”)
2. Name(s) of the financial institution and the other institution jointly applying forrehabilitation support, with Corona Industries
The Shoko Chukin Bank (hereafter “Shoko Chukin”) and Itochu Plastics Inc. (hereafter“CIPS”)
3. Outline of business revitalization plan
Please see appendix
4. Comments from State Ministers in charge of ETIC
Prime Minister, Minister of Internal Affairs and Communications, 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
Corona Industries. However, I ask that after reaching the decision to support, ETIC
should encourage Corona Industries to discuss the situation with employees of thecompany as soon as possible. I also ask that in advising on and guiding theimplementation of the corporate revitalization plan, ETIC should aim to ensure that
Corona Industries complies with related laws and regulations, and that Corona
Industries also provides adequate opportunities for substantive discussions with theworkforce with due consideration of employment stability and other such factors.”
5. Comment from State Minister supervising business activities
Minister of Economy, Trade and Industry: No opinion expressed1

6. Debt purchase application period
From Friday, May 20th, 2011 for receipt by ETIC no later than Wednesday, July 20th, 2011
7. Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, the financial institutions have been requested
not to recover loans or exercise any other rights they may have as creditors before theend 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 Corona Industries. No request for support will
be made with regard to trade debt. Therefore there will be no impact on trade andgeneral creditors.
9. Basis for decision to support
ETIC‟s basis for deciding to provide support is as follows.
9.1 Rationale
The core business of Corona Industries is the manufacture and sale of products andcomponents using decorative, processed or surface-treated aluminium, servicing
clients in the automotive, precision equipment, consumer lifestyle, home applianceand other such sectors. Corona Industries is one of only a limited number of domestic
operators in the field of aluminium surface processing that can offer a comprehensive
service, from moulding through to colour dye impregnation, and is one of the few
manufacturers operating large-scale equipment that can efficiently produce highvolumes and large items. Corona Industries has advanced capabilities in aluminium
anodization and chemical etching, and works closely with large automakers, home
appliance manufacturers and other such businesses producing autoparts, digitalappliances, mobile phone handsets and other such items. The company also has
cutting edge technology called “ALPLAS” in aluminium plastic composites, and is
expected to be engaged in related new business development for these composites ina range of areas.
Using the management resources and superior technical capabilities outlined above,
Corona Industries has developed a strong customer base, providing a wide range of
products to some of Japan‟s leading manufacturers on the global stage, and2

effectively serving as one of the key supporting parts manufacturers for Japan‟s core
export industry.
The collapse of Corona Industries would mean that its customers would be required tofind alternatives manufacturers, change specifications or take other such steps. This
would harm the relationship between producers and end users and cause damage tomultiple transaction partners. Moreover, it could lead to the loss of opportunities tomake use of this superior technology not only domestically but also overseas among
companies in similar industries.
Currently, the high yen and other factors are driving the major domestic customers ofCorona Industries to shift their manufacturing bases away from Japan. In the sameway, it is also becoming a pressing issue for small- and medium-sized parts makers
such as Corona Industries to transfer their manufacturing bases to overseas locations
while maintaining technical capabilities within Japan. ETIC believes that supporting
Corona Industries has merit not only in terms of its link to supporting Japan‟s primaryexport industry, but also as a means of demonstrating a business model and direction
for the revitalization of small- and medium-sized Japanese parts makers that havestrong technology credentials.
9.2 Role of ETICIn deciding to support Corona Industries, ETIC‟s planned role is as follows:(1) Act as a coordinator among the financial institutions involved(2) Implement a capital injection(3) Establish a new financing framework(4) Guarantee new financing to be provided by the financial institutions(5) Supply management personnel.
With regard to (1) above, ETIC will reduce excessive interest-bearing debt and improve
the financial condition of Corona Industries by requesting debt forgiveness from thefinancial institutional creditors. With regard to (2), Corona Industries will undergo acompany separation, forming a new company (the “Continuing Company”, detailed laterin this document) to carry its continuing operations. ETIC will underwrite ¥892.5 millionof ordinary shares in the Continuing Company, thereby providing funding necessary forbusiness restructuring and other such expenses. (The underwriting amount above is thetotal of the acquisition price of shares in the Continuing Company and a capital3

injection.) With regard to (3), ETIC will aim to support the financial strength of thecompany by addressing the risks of unspecified debt obligations emerging. With regard
to (4), ETIC will facilitate funding procurement by guaranteeing a maximum of¥150 million of the uncollateralized portion of a planned maximum of ¥300 million in
financing by Shoko Chukin. With regard to (5), ETIC will place management staff within
the Continuing Company to help pursue steady and effective business revitalization.
Appendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support
1.1

Name of company
Corona Industries Ltd. (hereafter, “Corona Industries”)

1.2 Head office
4-23-8 Takanawa, Minato-ku, Tokyo
1.3 Date of establishment
1957
1.4 Capital¥100,000,000
1.5 Shares
Number of shares authorized:

400,000 shares

Number of shares issued and outstanding:

200,000 shares

1.6 Main business
The manufacture and sale of products and components using decorative,
processed or surface-treated aluminium
1.7 Number of employees
213 (as of March 31, 2011; includes temporary employees, contracted employees
and part-timers)
1.8 Labor union
There is no labor union at Corona Industries
1.9 Main banks
1. The Shoko Chukin Bank,Ltd.
2. The Bank of Tokyo Mitsubishi UFJ, Ltd.
3. Japan Finance Corporation
4. The Tokyo Higashi Shinkin Bank
5. The Bank of Yokohama, Ltd.
6. Yachiyo Bank, Ltd.
4

7. Joyo Bank, Ltd.
8. The Hachijuni Bank, Ltd.
9. The Towa Bank, Ltd.
10. The Tokyo Tomin Bank, Limited
11. Mizuho Bank, Ltd.
1.10 Financial overview (financial results for the year ended March 31 st, 2010)
Net sales¥2,706,000,000

Operating income (loss)(¥565,000,000)

Ordinary income (loss)(¥543,000,000)

Net income (loss)(¥1,007,000,000)

Net assets(¥572,000,000)

Total assets¥5,155,000,000

Section 2: Background and circumstances leading to request for ETIC support
Corona Industries was established in 1957 as the continuing company of its predecessor,
Corona Shokai, which was established in 1948. For the past 50 years Corona Industries hasdeveloped its business with aluminum anodization as its core field of expertise, and has
continued to produce high quality decorative aluminium products by combining several
different processes, from those related to chemical etching—which is part of the aluminium
anodization process—to aluminium surface processing, pressing, sheet metal work,machining, printing and coating.
Backed by a high level of product quality built up over many years, the company works
closely with large automakers, home appliance manufacturers, consumer lifestyle productmanufacturers and other such businesses around the world, producing decorative parts forautomotive interiors, components for mobile phone handsets and digital cameras, andinterior and furniture parts. Net sales for the fiscal year to March 2009 was ¥5.2 billion.
In recent years, however, major domestic automakers, home appliance manufacturers andconsumer lifestyle product manufacturers have accelerated efforts to relocate production
bases to low-cost overseas locations, and this resulted in the closing of the company‟s
Saitama factory.
Meanwhile, from 2008 to 2009, the Yokohama business unit received a sudden increase in5the volume of orders for digital camera components from a particular digital camera
manufacturer, which offset the reduction in sales caused by the relocation of major
customers to overseas locations. In order to cope with the increase in customer demand,the company made a large-scale capital investment, obtaining a second Yokohama plant in2006, and a third Yokohama plant in 2008. After the said customer relocated its production
base overseas, in order to continue to maintain demand for product components, Corona
Industries fulfilled the said customer‟s request to plan the establishment of a manufacturing
plant in Vietnam. Corona Industries invested ¥200 million to establish a local subsidiary in
Vietnam, acquired land for the plant, and commenced construction.
Meanwhile, in the process of manufacturing digital camera components to meet therequirements of this customer, a large volume of defective products were manufactured, andCorona Industries suffered significant losses. As a result, Corona Industries lost its accountwith the customer, a trading partner which it had relied on for approximately 50% of its sales,
and the company experienced a sharp reduction in sales.
Furthermore, with a heavy burden of increased interest-bearing debt generated fromexcessive capital investment, the company had difficulty committing to repayment of theinterest and principal. Accordingly, Corona Industries made a request to its bank for an
extension on the repayment of its liabilities. At the same time, it made a request to leasecreditors for an extension on lease payments as they accounted for a significant amount of
the company‟s liabilities. CIPS, a company which rates the technological capabilities ofCorona Industries highly, announced its intention to provide support to Corona Industries,
and based on the approval of its banks, Corona Industries received from CIPS a loan of¥600 million. Using this credit facility to borrow funds, Corona Industries was able to cover
operating capital deficiencies and avoid bankruptcy. However, in order to continue business
operations, it found that it needed to drastically reduce its interest-bearing liabilities under aframework which would not damage business dealings.
In cooperation with its main bank the Shoko Chukin and CIPS, Corona Industries decided toapply to ETIC for support to ensure business revitalization through transparent and fairmeans, while minimizing damage to the value of its business by promoting a swift businessintegration.
Section 3: Outline of business revitalization plan
1. Basic policy
It is planned that ETIC and CIPS will collectively hold all the ordinary shares in a6

Continuing Company to be formed through a company separation (merger absorption)of Corona Industries using the Second Company method. Following this, a businessplan will be implemented that incorporates the following main points.
(1) Undertake reform to enable a change in business structure
A number of factors, including a downturn in automobile production after the Lehman
Shock and the shift of domestic home appliance makers to overseas production
bases, have contributed to a shrinking of the domestic market, and the subsequentefforts of industry peers to survive have led to excessive competition. As a means ofovercoming this situation, the Continuing Company of Corona Industries will receive
support from the sales network of CIPS, with the aim of expanding sales of highadded value products using aluminum plastic composites. Production locations willbe established overseas, enabling global cost competitiveness at the same time as
expanding sales opportunities by being located close to the overseas locations ofcustomer companies. Concomitant with this, the business will actively work toincrease demand in the growth markets of emerging markets.
When considering future business direction, it will be necessary to take into accountthe potential for competitors in China, Taiwan and elsewhere to catch up with Corona
Industries‟ advanced technical capabilities. For this reason, the aluminum plastic
composite business will rapidly be developed to encompass new materials such as
stainless steel, copper, magnesium and die-cast aluminum.
(2) Reform domestic operations to reduce costs
The domestic market currently suffers from oversupply. Morever, with a fall in sales,
revenue from each order has fallen, with repeated small lot orders leading tofrequent handling and a marked loss of manufacturing efficiency. Accordingly,
outgoing currently exceed revenues by a significant margin. This situation will berectified by moving rapidly to stabilize revenues from the domestic business,
reducing costs through taking steps such as closing and combining plants, andimproving production efficiency by selecting and concentrating orders.
(3) Reform the management structure
The management structure will be strengthened as a means of pursuing effective
implementation

andsustained

benefits

from

the

comprehensive businessrestructuring and cost cutting measures outlined above. The current vertically7

segmented management system is having a strongly negative impact, and thecontinuation of the old management system has hindered management reform,
making comprehensive reform an urgent task.
ETIC and CIPS will work together to comprehensively reform corporate governanceof the company, aiming to optimize every aspect of its operations while constructing amanagement platform that enables efficient decision-making. Specific measures toshift from the inefficient current system will include encouraging a new mindset
across the company, introducing KPIs, introducing a unit price administration system,
and constructing a human resources system.

2. Business plan
ETIC and CIPS will ultimately hold all the ordinary shares in a Continuing Company thatwill be established to receive, via a company separation (merger absorption) thecontinuing operations of Corona Industries, namely the manufacture and sale ofproducts and components using decorative, processed or surface-treated aluminium.
Funds for the expenses related to this company separation, along with funds necessary
to implement the business revitalization plan, will be procured through a third-party
share issue.
A certain portion of the debt currently owed to CIPS by Corona Industries will, after
transfer to the Continuing Company, through consideration-in-kind be converted toequity through a debt equity swap.
Corona Industries will apply for liquidation through special liquidation proceedings after
completion of the merger absorption.
3. Request for financial support
Of the estimated ¥4.6 billion currently owed to financial institutions and others by
Corona Industries, financial support (effectively, debt forgiveness) will be requested forapproximately ¥2.2 billion. (Note: The amount of financial support is based on a
calculation of the disposal value of non-operations-related real estate. The final
amount of financial support will change, as the amount of loan repayment is linked tothe achieved real estate disposal values.)8

4. Financing
The Continuing Company will issue ordinary shares for the purposes of financing
structural reform, capital expenditure and other such items, of which ETIC will
underwrite ¥892.5 million and CIPS will underwrite ¥857.5 million. (This amountincludes the amount paid by ETIC for the acquisition of outstanding shares at the timeof the establishment of the continuing company, along with the planned debt equity
swap by CIPS. The Continuing Company will also receive new financing from Shoko
Chukin of a maximum of ¥300 million in working capital, of which ETIC will underwrite amaximum of ¥150 million of the portion for which there is insufficient collateral.
Moreover, with regard to potential debt that may arise in the Continuing Company but
which cannot yet be determined, ETIC will establish a financing framework to a
maximum of ¥150 million. In addition to these measures, the Continuing Company will
receive a maximum of ¥700 million in new financing from financial institutions to fundcapital expenditure at a subsidiary in Vietnam.
Section 4. Conformance with standards for support
1. Requirements related to standards of support
1.1 Possession of effective management resources
Corona Industries has advanced capabilities in aluminium anodization and chemical
etching, and is recognized around the world for its advanced technological abilities. The
company also has cutting edge technology in aluminium plastic composites, which canbe used in appliances and auto parts. This technology can also be applied to growthmarkets such as smart phones and tablet computers, and in the future, medical devices.
Compared to similar existing technology it has greater strength, higher precision, anduses fewer raw materials. Items manufactured using these technologies are used inJapan‟s key industries—the automotive and electronics industries—and the technology
plays a role in maintaining the competitive advantage of these industries. Therefore, it
can be said that Corona Industries possesses effective management resources.
1.2 Excessive indebtedness
Corona Industries carries an excessive amount of debt compared to revenues. Debt
forgiveness and other financial support is essential to the revitalization of Corona
Industries.
2. Factors confirming potential for business revitalization
92.1 Agreement of main creditors
Corona Industries made a joint application for support with core creditor Shoko
Chukin and business sponsor CIPS
2.2 Standards for productivity improvement
The required standards for productivity improvement are expected to be met throughthe implementation of this business revitalization plan.
2.3 Standards for financial soundness
The required standards for financial soundness are expected to be met through theimplementation of this business revitalization plan.
2.4 Comparison with liquidation value
The value of debt able to be recovered upon implementation of the business
revitalization plan is estimated to be greater than the value available throughliquidation.
2.5 Potential to refinance and for sale of shares within three years
Implementation of the business revitalization plan is expected to significantly
improve the financial condition of Corona Industries and enable the continuing company
to secure sustainable cash flow, making refinancing sufficiently likely.
2.6 Connection with structural oversupply
Implementation of the business revitalization plan will not increase the supply capacity ofCorona Industries. Accordingly, the plan has been judged as „not hindering theresolution of structural oversupply‟ with reference to Article 19 of the Act on Special
Measures for Industrial Revitalization and Industrial Innovation.
2.7 Status of consultations with unions
Because there is no labor union at Corona Industries, it is planned that following thedecision to provide support, meetings with employees will be promptly scheduled as partof the revitalization process, to explain the main points of the business revitalization planand consult on employment and working conditions.
Section 5: Responsibility of managers
The responsibility of the management team of Corona Industries will be reflected in the10resignation, after implementation of the business separation, of all current directors andauditors, without directors‟ retirement benefits. However, following business separation,
director Atsushi Yamaguchi is scheduled to be appointed as liquidator to implement the
special liquidation proceedings, and will cease to become director on completion of theliquidation process.
Section 6: Responsibility of shareholders
Reflecting the responsibility of shareholders, in the special liquidation of Corona Industries
outlined in the business revitalization plan shareholders are not expected to receive any
distribution of remaining assets, and will cease to become shareholders on completion of
the liquidation process.

ENDS

11