REVIC to Provide Support to Kotobuki Industries Co., Ltd.
September 13th, 2013
Regional Economy Vitalization Corporation of JapanThe Regional Economy Vitalization Corporation of Japan (“REVIC”), has decided toprovide support to Kotobuki Industries Co., Ltd. under Article 25, Clause 4 of theRegional Economy Vitalization Corporation of Japan Act (Act 63, of 2009, hereafter “theREVIC Act”).
1. Name of company concerned
Kotobuki Industries Co., Ltd. (hereafter “Kotobuki Industries”)
2. Name of financial institutions jointly applying for rehabilitation support with KotobukiIndustries
The Momiji Bank, Ltd., The Hiroshima Bank, Ltd., Kure Shinkin Bank, and Shoko
Chukin Bank, Ltd.
3. Outline of business revitalization plan
Please see appendix.
4. Debt purchase application period
From Friday, September 13th, 2013 for receipt by REVIC no later than Friday,
November 29th, 2013.
5. Request for temporary suspension
Under Article 27, Clause 1 of the REVIC Act, related financial institutions have beenrequested not to recover loans or exercise any other rights they may have as
creditors, other than those permitted under the corporate revitalization plan, before
the end of the debt purchase period as per item 4 above.
6. Treatment of trade creditors
The decision by REVIC to provide support involves requesting the waiver of debt only
from the financial institutions providing loans to Kotobuki Industries. No request for
support will be made with regard to trade debt. Therefore there will be no impact on
trade creditors.
7. Basis for decision to support
REVIC’s basis for deciding to provide support is as follows.
(1) Rationale
Kotobuki Industries is one of Japan’s leading manufacturers of forged steel products,steel materials and cast iron, with a history dating back more than 70 years and a large
number of end-user customers, including industrial machinery manufacturers,
construction machinery manufacturers, automakers and shipbuilders. The company
has established a stable and high-quality customer base as a main supplier, andposseses high-level technical capabilities, process patents and specialist know-how
which has placed it in high demand both domestically and around the world.
Kotobuki Industries and its consolidated subsidiaries with which it holds business
relationships (hereafter “Kotobuki Industries Business Group”), are the only
manufacturers in the steel products business in Asia that conduct direct sales of semifinished special steel frames, making them highly valuable to large scale steelmakers
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as well as small and medium scale castings manufacturers.
Kotobuki Industries owns an anchor and chain manufacturing plant, which it
operates domestically in competition with only two other companies, and therefore is ina valuable position as a supplier to domestic ship manufacturers.
The Kotobuki Industries Business Group employs approximately 400 personnel,
mainly in Kure-shi, Hiroshima, and as such the revitalization of Kotobuki Industries will
help to achieve stable employment conditions in the region. Additionally, Kotobuki
Industries holds supply and outsourcing relationships with approximately 200 SMEs in
the region, and in the event of the collapse of Kotobuki Industries, the impact on theregional economy would be considerable.
Considering the above, REVIC believes there is ample merit in supporting therevitalization of Kotobuki Industries as a means of revitalizing the local economy.

(2) The Role of REVIC
In deciding to support Kotobuki Industries, REVIC’s planned role is as follows:(1) Act as a coordinator among the financial institutions involved(2) Provide a capital increase totaling ¥500 million(3) Provide new loans totaling ¥350 million(4) Appoint new management personnel
With regard to (1) above, REVIC will reduce excessive interest-bearing debt and improve
the financial condition of Kotobuki Industries by requesting debt forgiveness fromfinancial institutional creditors. With regard to (2), REVIC will provide capital for structuralreform initiatives by acquiring ¥500 million of ordinary shares and providing funds
sufficient for the company to continue operations. With regard to (3), REVIC will provide
new loans totaling ¥350 million to enable the company to conduct capital investment andstructural reform. With regard to (4), REVIC will place management staff within thecompany after REVIC has acquired shares in line with (2) above, to support steady
implementation of the business revitalization plan.

*Reason for disclosure
The company names involved with this matter have been disclosed with permission from
Kotobuki Industries and financial institutions jointly applying for support, so as to avoid
damaging trust in Kotobuki Industries, and because it will contribute to the revitalizationof it.
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Appendix: Outline of the Business Revitalization PlanSection 1: Overview of the companies receiving support
1. Names ofcompany
2. Head Office

Kotobuki Industries Co., Ltd.

3. Date ofestablishment
4. Capital
5. Shares

September 26th, 1951

6. Keyshareholders
7. Main business
8. Number of
employees

9. Consolidated
subsidiaries
10. Main facility
locations
11. Main banks

12. Financial
overview(Non consolidated
financial results for year
ended November 2012)

1-8-1 Shinjuku, Shinjuku-ku, Tokyo, Japan48 million yen
Total number of authorized shares: 160,000 shares
Total number of issued shares: 96,000 shares
Hiroe Shimizu (75.0% of total) Seiichiro Okuhara (25.0% of total)
Manufacture and sale of steel products and castings, etc.
(Non consolidated) 56 full time, 20 temporary, and 2 contract
employees(Consolidated) 319 full time, 48 temporary, and 19 contract
employees(as of November 30, 2012)
Kotobuki Steel Co., Ltd., Kotobuki Machinery Co., Ltd., Kotobuki
Chemical & Environmental Machinery Co., Ltd.,Kotobuki Casting Co.,
Ltd., Kotobuki Chain Anchor Co., Ltd., Nihon Chain Anchor Co., Ltd.
Hiroshima Hiro Works (1-2-43 Hiroshiratake, Kure-City, Hiroshima)
The Momiji Bank, Ltd., The Hiroshima Bank, Ltd., Kure Shinkin
Bank, and Shoko Chukin Bank, Ltd.
Sales: 17,128 million yen, Ordinary income: (1,496 million yen)
Net income: (2,487 million yen)
Net assets: 512 million yen, Total assets: 31,373 million yen(Ref) Excluding losses from Kitakyushu Business:
Sales: 15,780 million yen, Ordinary income: 320 million yen

Section 2: Background to the request for support
Between 2007 and 2009, Kotobuki Industries decided to establish a business inKitakyushu-shi for the manufacture and sale of large castings for components used in
the marine industry.
Kotobuki Industries invested a significant amount of funds, sourced through loans
from related financial institutions, to establish Asia Special Steel Co., Ltd. (hereafter“Asia SS”), a joint venture with a Korean company, for the manufacture of special steel
base material for use in ingot for the Korean market and at the Kitakyushu Works.
Kotobuki Industries constructed the Kitakyushu Works on the same premises as theAsia SS plant, and worked together with Asia SS to grow Asian-bound sales oflarge-size steel castings for marine use (hereafter referred to as the “KitakyushuBusiness”).
The Kitakyushu Business was put forward as a project to increase competitivenessby combining the manufacturing operations of both the Kitakyushu Works and Asia SS.
However the global financial crisis struct midway through the construction of the plants,and although both plants launched operations in October 2009, due to the decline in3

demand and foreign exchange rate impact which peaked during the global financial
crisis, the rate of facility operations of the Kitakyushu Business fell behind, and thebusiness became unprofitable. Although Kotobuki Industries and Asia SS implemented
staff reductions and other restructuring, the large capital investment became a majorburden for both companies (both companies revieved loans from financial institutions
to fund the construction of both plants, and Kotobuki Industries was named as
guarantor of the loans received by Asia SS). Just three years after its establishment,
the prospects for continuing the Kitakyushu Business became bleak, and thecompanies were forced to withdraw from the business, leaving only large sums of debt.
As a result, Asia SS applied for bankruptcy proceedings in April 2012, and Kotobuki
Industries’ Kitakyushu Works was liquidated and operations were suspended in July
2012. Accordingly, in order to rebuild its business, and following discussions with its
main banks The Momiji Bank, Ltd., The Hiroshima Bank, Ltd., Kure Shinkin Bank, andShoko Chukin Bank, Ltd., Kotobuki Industries resolved to apply for support fromREVIC.

Section 3: Outline of business revitalization plan
1. Basic policy/key measures of the business plan
A Succeeding Company will receive and continue the core business operations of
the Kotobuki Industries through a company separation (absorption separation) using
the second company method. The following measures will be implemented at theSucceeding Company with the aim of revitalizing the business.
(1)

Maintain and expand sales and profit in the steel manufacturing business
Kotobuki Industries will work to reinforce business with its main customers, aiming
to maintain and expand sales and profit.

(2) Improve profitability of steel castings for marine and industrial use
In addition to existing orders for steel castings for marine use, Kotobuki Industries
will aim to increase orders of castings for industrial use, and at the same timestrengthen its management systems, and work to improve profitability by better
utilizing its limited management resources.
(3) Streamline capital investment
After ascertaining how to best streamline capital investment, Kotobuki Industries
will aim to increase productivity through highly efficient capital investments, while
restricting unnceccesary capital investments or repairs.
(4) Organzational management system and HR policy reform
A speedup of Kotobuki Industries’ decision making processes will be achieved
through consolidation and/or delegation of authority, and at the same time all indirect
administrative activities at consolidated subsidiaries that have a business
relationship with Kotobuki Indutsties will be merged. A low-cost business structure
will be developed thorough streamlining of Kotobuki Industries’ organization andpersonnel, so as to develop a structure with improved cost competitiveness acrossthe entire Kotobuki Industries Business Group, and optimize the Group-wideorganization.

42. Corporate restructuring
Kotobuki Industries will use the absorbtion separation method to transfer all
operations and bearable debt to a new Succeeding Company established by
Kotobuki Industries. Subsequently, following the disposal of real estate assets,
Kotobuki Industries will apply for special liquidation.
Following company separation, the Succeeding Company is scheduled to receivea capital injection of ¥500 million from REVIC (including payment to Kotobuki
Industries for the value of the shares transferred), and receive an investment in kindfor debt (which has been approved by Kotobuki Industries as bearable debt) fromcreditors who request a debt equity swap. The company is also scheduled to receive
a loan facility of ¥350 million from REVIC, and ¥350 million from the Momiji Bank,
Ltd. for use as operating cash..
3. System of corporate governance, etc.
With regard to the Board of Directors, the company will work to speed up its
decision-making processes by reducing the number of directors. It is also scheduledthat new staff will be appointed by the company and REVIC, and the majority of themembers of the Board of Directors will be appointed by REVIC.
Furthermore, through the transfer of shares and new shares issued upon
third-party allocation, REVIC will retain the Kotobuki Industries’ shares, securing
governance at the company and ensuring the progress of the business revitalization
plan as a shareholder.
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