REVIC to Provide Support to Nakayama Steel Works, Ltd.
March 28th, 2013
Regional Economy Vitalization Corporation of JapanThe Regional Economy Vitalization Corporation of Japan (“REVIC”), has decided to provide
support to Nakayama Steel Works, Ltd. under Article 25, Clause 4 of the Regional Economy
Vitalization Corporation of Japan Act (Act 63, of 2009, hereafter “the REVIC Act”),
1. Name of company concerned
Nakayama Steel Works, Ltd. (hereafter “Nakayama Steel Works”)
2. Name of financial institution jointly applying for rehabilitation support with Nakayama
Steel Works
The Bank of Tokyo-Mitsubishi UFJ, Ltd. (hereafter “BTMU”)
3. Outline of business revitalization plan
Please see appendix.
4. Debt purchase application period
From Thursday, March 28th, 2013 for receipt by REVIC no later than Thursday, June 20th,2013.
5. Request for temporary suspension
Under Article 27, Clause 1 of the REVIC Act, related financial institutions as specified in
Article 26, Clause 1 of the act, have been requested not to recover loans or exercise anyother 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 Nakayama Steel Works. No request for
support will be made with regard to trade debt. Therefore there will be no impact on the
trade creditors.
7. Basis for decision to support
REVIC’s basis for deciding to provide support is as follows.

1(1) Rationale
Nakayama Steel Works is a medium-sized steel maker which has operated forapproximately 90 years in Taisho Ward, Osaka. The company possesses an excellent
customer base, currently servicing more than 450 end-user clientele.
Leveraging advanced expertise developed since its years as blast furnace maker,
Nakayama Steel Works and its subsidiaries (hereafter referred to as “Group Subsidiaries”,
and collectively with Nakayama Steel Works as “Nakayama Steel Works Group”), areinvolved in high-grade steel bars, sheets and plates of metal and other products with uniquecharacteristics. The Nakayama Steel Works Group has revenues among the highest ofelectric furnace manufacturers in Japan.
The Group also has a significant competitive advantage in fabricated products, with thelargest domestic share held by consolidated subsidiaries Nakayama Mitsuboshi Steel
Products, Ltd. in C type channel steel and Sansen-Shear Co., Ltd. in checkered plate.
REVIC believes that the abovementioned customer base and competitive advantage
inherent in Nakayama Steel Works are a valuable business resource to Osaka city.
Moreover, by implementing the business revitalization plan, Nakayama Steel Works will
work to reduce its supply capacity with the aim of optimizing and slimming down its
operations, and this is expected to lead to a reduction in domestic structural oversupply.
Taking into consideration the numerous raw materials trading companies and cooperative
companies (contracted manufacturing and logistics, etc.), the total number of personnel
associated with Nakayama Steel Works is substantial. In the event of the collapse of
Nakayama Steel Works, there would be significant impact on the employment of a large
number of people, causing a widespread effect on the economy of Osaka.
Considering that it possesses business resources of value to Osaka city, has continued tocontribute to the development of the local economy since its establishment, and continues
to support the stable employment of numerous personnel associated with its business,
REVIC believes there is ample merit in supporting the revitalization of Nakayama SteelWorks as a means of revitalizing the local economy and ensuring stable employment in thelocal community.
(2) The Role of REVIC
In deciding to support Nakayama Steel Works, REVIC’s planned role is as follows:2(1) Act as a coordinator among the financial institutions involved(2) Support the execution of the business revitalization plan
With regard to (1) above, REVIC will coordinate activities which Nakayama Steel Works
have found difficult to execute independently, including reconciling the interests of the Group
Subsidiaries, related financial institutions, sponsors, and other related parties from a fair andneutral standpoint. REVIC will pursue the smooth progress of the revitalization Nakayama
Steel Works’ business, by asking the financial and other institutions concerned to provide
financial assistance, including debt forgiveness, to reduce the level of excessiveinterest-bearing debt and improve the financial state of Nakayama Steel Works, and byasking the numerous sponsors to implement capital injection at Nakayama Steel Works tosecure sufficient capital for restructuring and capital expenditure. Support for therevitalization of Nakayama Steel Works is very strong, including financial assistance from
related financial institutions and a capital injection from sponsors of around 9.0 billion yenscheduled in the business revitalization plan. Upon agreement to manage or dispose of debt
in accordance with the business revitalization plan, Nakayama Steel Works is scheduled tocontinue to receive support from related financial institutions, and in the event of an
application to purchase debt by related financial institutions, a debt purchase will also be
implemented by REVIC.
With regard to (2), REVIC is scheduled to support Nakayama Steel Works in building stable
management foundations.
REVIC will not provide Nakayama Steel Works with financing or provision of management
personnel.
*Reason for disclosure
The company name involved with this matter have been disclosed with permission from
Nakayama Steel Works and The Bank of Tokyo Mitsubishi UFJ, so as to avoid trust damageof Nakayama Steel Works, otherwise, as a listed corporation, and because it will contributeto the revitalization of it.
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Appendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support
1.1 Name of company
Nakayama Steel Works Co., Ltd. (Hereafter “Nakayama Steel Works”)
1.2 Head Office
1-1-66 Funamachi, Taisho Ward, Osaka
1.3 Date of establishment
December 22, 1923
1.4 Capital¥15,538,509,066
1.5 Shares
Total number of authorized shares:

300,000,000 shares

Total number of issued shares:

131,383,661 shares

1.6 Key shareholders
Name

RelationshipNo. of shares held

% of total

Nippon Steel & Sumitomo Metal

Customer

12,875,957

9.80%

Incorporated foundation

10,683,195

8.13%

Main bank

4,966,901

3.78%

Nakayama Shareholders Association

Shareholders' association

2,939,211

2.23%

Nakayama Steel Works Co., Ltd.

Own shares

2,673,422

2.03%

CBNY DFA INTL SMALL CAP VALUE

Investor

2,655,000

2.02%

Amagasaki Seikan Co., Ltd.

Customer

1,992,554

1.51%Japan Trustee Services Bank, Ltd.

Investor

1,903,000

1.44%

Nippon Steel Trading Co., Ltd.

Customer

1,698,000

1.29%

Sumitomo Life Insurance Company

Investor

1,501,000

1.14%

43,888,240

33.40%

Corporation
Nakayama Foundation

established by company
founderBank of Tokyo Mitsubishi UFJ
LimitedPORTFOLIO(Standing proxy: Citibank Japan Ltd.)(Trust Account 4)(Standing proxy: Japan Trustee
Services Bank, Ltd.)
Total

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1.7 Main business
Steel business, engineering business, real estate business
1.8 Consolidated subsidiaries
Nakayama Mitsuboshi Steel Products, Ltd., Nakayama Trading Co., Ltd.,
Mitsuboshi-Shoji Co., Ltd., Mitsuboshi Kaiun Kaisha, Ltd., Sansen-Shear Co., Ltd.,
Nakayama Kosan, Co. Ltd.
1.9 Number of employees
518 full-time employees and 20 temporary employees (as of January 1, 2013)
1.10

Main facility locations

Head Office and Funamachi Plant (1-1-66 Funamachi, Taisho Ward, Osaka)
1.11

Banks

Bank of Tokyo Mitsubishi UFJ,

Mitsubishi UFJ Trust andSumitomo Mitsui Trust Bank, Limited

LimitedBanking, Corporation

Aozora Bank, Ltd

The Bank of Fukuoka, Ltd.

Development Bank of Japan Inc.

The Shoko Chukin Bank, Ltd.

Resona Bank, Limited.

The Senshu Ikeda Bank, Ltd.

The Shizuoka Bank, Ltd.

Bank of Kyoto, Ltd.

The Nanto Bank, Ltd.

Japan Securities Finance Co., Ltd.

The Minato Bank, Ltd.

The Bank of Iwate, Limited.

Shinsei Bank, Limited.

The Hyakugo Bank, Ltd.

The Yamaguchi Bank, Ltd.

The Hachijuni Bank, Ltd.

The Iyo Bank, Ltd.

The Hiroshima Bank Ltd.

The Daisan Bank, Ltd.

The Fukui Bank, Ltd.

Osaka Prefectural Credit Federationof Agricultural Co-Operative.

The Hyakujushi Bank, Ltd.

The Aichi Bank,Ltd.

Kiyo Bank, Ltd.

The Ashikaga Bank, Ltd.

The San-in Godo Bank,The Daishi Bank, Ltd.

Ltd.
The Kagoshima Bank, Ltd.

The Ogaki Kyoritsu Bank,

The Nishi-Nippon City Bank, Ltd.

Ltd.
Joyo Bank, Ltd.

Shinkin Central BankThe Chiba Bank, Ltd.

Shiga Bank, Ltd.

The Juroku Bank, Ltd.

North Pacific Bank, Ltd.

The Toho Bank, Ltd.

Total: 40 banks

1.7

Financial overview(Non consolidated financial results for year ended March 31, 2012)
Sales¥113,881 million

Ordinary income(¥8,343 million)

Net income(¥12,817 million)

Net assets¥14,031 million
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Total assets¥136,112 million

Section 2: Background to the request for support
Although Nakayama Steel Works' business made a relatively strong recovery following its
restructuring in 2002 to become an electric furnace maker, its business conditions suddenly
deteriorated due to the sudden drop in demand for steel as a result of the global recession in2008 that stemmed from the collapse of Lehman Brothers. In 2009, it recorded an operating
loss.
Nakayama Steel Works restructured its business in to achieve an operating profit. It
suspended the operations of its revolving furnace plant and coke plant, reorganized its
energy supply systems, and achieved significant cost savings.
Despite these efforts, serious problems remained. The company owned factory sites andnon-working facilities from its days as a blast furnace maker, and it was unable to free itself
from its complex, high-cost personnel structure. The deterioration in the company's financial
situation as a result of the collapse of Lehman Brothers and other factors meant that it was
no longer able to service the additional interest-bearing debt that it had taken on for new
investment in a hot rolling mill from 2006 onwards. These various problems facing thecompany on the business front, financial front and on the managerial and organizational
front came to a head. From 2009, the company recorded significant operating losses forthree consecutive financial periods. At present, Nakayama Steel Works has been granted its
third postponement of the repayment of the principal of the interest-bearing debt from
related financial institutions.
In consultation with its main bank, BTMU, Nakayama Steel Works applied to REVIC forsupport. With the support of REVIC, the company will seek to avoid harming the value of its
business, it will rely on financial assistance from the related financial institutions obtained
through fair and transparent procedures, it will obtain capital from its sponsors, and it willthoroughly restructure its business and work to maximize corporate value.

Section 3: Outline of business revitalization plan
1. Basic policy of the business plan
The Nakayama Steel Works Group is a medium-sized steel manufacturer and is one of
the top electric furnace makers in Japan in terms of sales (with consolidated sales of6

171.8 billion yen in the year ended March 31, 2012). Moreover, while many electric
furnace makers handle general-purpose steel bars, Nakayama Steel Works is involved
with high-grade steel bars, sheets and plates of metal and other products that havespecific characteristics.
The business revitalization plan aims to improve the profitability of Nakayama SteelWorks' steel materials business (sheet metal and steel bars) which is the company's
main business. The plan seeks to achieve this aim by: 1) planning thorough cost
reductions; 2) building a business base that is resistant to the influence of market
conditions including exchange rates; 3) strengthening the integrated management of theGroup so it can utilize its excellent customer base (Nakayama Steel Works' customer
base consists of more than 450 end-user clientele); and 4) improving the company's
financial state.
The business revitalization plan contains the following three basic policies(1) Establish the best low-cost management in the industry
Nakayama Steel Works will thoroughly slim its organization by withdrawing from
unprofitable products and businesses, including the suspension of its steel plate
works, and will switch over to the importation of cheap raw materials by diversifying its
sources of iron ore. It will increase the efficiency of its plant operations, and will
significantly reduce staffing levels as it aims to create the lowest-cost management
structure in the electric furnace industry.
Nakayama Steel Works will alter and renew its organizational management structure.
It will concentrate decentralized authority and speed up the decision-making processby slimming the number of directors from the six at present down to three. New
directors will be elected, including two from the external organizations.
(2) Demonstrate the company's total strength by improving the integrated managementof the GroupThrough integration with its Group Subsidiaries, Nakayama Steel Works will achieve afurther lowering of costs. The company will integrate the sales power that is acompetitive advantage of the Group Subsidiaries, and demonstrate the total strengthof the Nakayama Steel Works Group.
In addition, the distribution functions and internal divisions of the Nakayama Steel
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Works Group will be integrated(3) Improve the financial state of the company to one of financial health
The company will improve its financial state by receiving approximately 60.2 billion
yen in financial assistance from related financial institutions to reduce the level of its
interest-bearing debt to about 30.6 billion yen, and by receiving a capital injection
totaling 9 billion yen from its sponsors. In addition, BTMU will establish new lines ofcredit for the company, up to a limit of 1.5 billion yen; therefore, REVIC has noconcerns that the company will become short of funding.
2. Corporate restructuring(1) Exchange of sharesWith the aim of selecting and concentrating the Group’s overall management
resources and strengthening the system of corporate governance, Nakayama SteelWorks will carry out an exchange of shares (hereafter the "share exchange") between
Nakayama Mitsuboshi Steel Products, Ltd., Nakayama Trading Co., Ltd., Mitsuboshi
Shoji Co., Ltd., Mitsuboshi Kaiun Kaisha, Ltd., and Sansen-Shear Co., Ltd., making
these companies wholly owned subsidiaries of Nakayama Steel Works.
(2) Increase allocation of shares to third parties
Assuming that the share exchange goes ahead, Nakayama Steel Works will make athird-party share issue to its sponsors, as summarized below.

Percentage
SponsorsofPercentage of voting

voting rights in therights (the sponsor's

sharecurrent holdings areallocation

plan
Nippon Steel & Sumitomo Metal

included)
17.4%

19.8%

Nippon Steel Trading Co., Ltd.

9.7%

10.0%

Hanwa Co., Ltd.

14.8%

14.9%

Air Water Inc.

8.6%

8.7%

Osaka gas Co., Ltd.

3.6%

3.6%

Daiwa PI Partners Co., Ltd.

10.0%

10.0%

64.1%

67.0%

Corporation

Total

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The actual number of shares issued and the amount paid for them will be finalized
following consideration of the total number of Nakayama Steel Works shares that will
be outstanding following the share exchange. Therefore, it is possible that theabove-mentioned number of shares that the sponsors will receive, the percentage ofvoting rights they will obtain, and the amount they will pay for the shares may change.
As a result of the above-mentioned allocation of shares to its sponsors, Nakayama
Steel Works will procure a total of 9 billion yen in funding needed to carry out thebusiness revitalization plan, and the sponsors' percentage of Nakayama Steel Works
voting rights will exceed two-thirds in total.
REVIC will give the sponsors the maximum assistance and cooperation they require
to carry out the business revitalization plan.
(3) Reduction in capital surplus to compensate for retained earnings
To eliminate its retained losses as quickly as possible, Nakayama Steel Works will aim
to reduce its capital surplus in the first half of the year ending March 31, 2014 andtransfer the amount of this reduction to its retained earnings (to offset its retained
losses).
3. System of corporate governance, etc.
In principle, all Nakayama Steel Works' directors and standing statutory auditors will
retire, to clearly take management responsibility for the predicaments that have been thecauses of Nakayama Steel Works' difficulties. However, from among the current directors,
Mr. Kazuaki Hakomori will be appointed as a full-time director to support theimplementation of the business revitalization. In addition, some directors who have been
responsible for formulating the policies of the business revitalization plan will remain in
the business, after being demoted from their directorships, in order to complete therelevant policies.
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