ETIC to Provide Support to Shiroganekai Medical Association
March 22nd, 2012
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”), has decided to provide
support to Shiroganekai Medical Association 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 companies concerned
Shirogane Medical Association (hereafter “Shiroganekai”)/etc,
2. Name(s) of financial institutions jointly applying for rehabilitation support withShiroganekai
Aozora Loan Services Co., Ltd. (Hereafter “Aozora Loan Services”)
The First Bank of Toyama, Ltd. (Hereafter “First Bank of Toyama”)
3. Outline of business revitalization plan
Please 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
Shiroganekai. However, I ask that after reaching the decision to support, ETIC should
encourage Shiroganekai to discuss the situation with employees of the company assoon as possible. I also ask that in advising on and guiding the implementation of thecorporate revitalization plan, ETIC should aim to ensure that Shiroganekai complies
with related laws and regulations, and that Shiroganekai also provides adequate
opportunities for substantive discussions with the workforce with due consideration ofemployment stability and other such factors.”
5. Comment from State Minister supervising business activities
Minister of Health, Labour and Welfare: “Although Shiroganekai operates in theIshikawa central medical region, an area that has an oversupply of hospital beds, it playsa central role in the region, receiving mainly chronically ill patients for its long-term care1beds, and continues to maintain a high rate of bed utilization. I therefore have noobjection to the decision to support Shiroganekai.
I ask that in implementing the revitalization plan, due consideration is given to theopinion of the Governor of Ishikawa Prefecture, who is working to ensure that a proper
structure exists for the provision of medical services and to confirm the non-profit statusof medical institutions in the region, and that all necessary medical functions continue tobe delivered through a system that has an appropriate scale in terms of available
hospital beds and other such factors.”
6. Debt purchase application period
From Thursday, March 22nd, 2012 for receipt by ETIC no later than Friday, May 18 th,2012.
7. Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, financial institutions have been requested
not to recover loans or exercise any other rights they may have as creditors, other thanthose permitted under the corporate revitalization plan, before the end of the debt
purchase period as per item 6 above.
8. Treatment of trade creditors
The decision by ETIC to provide support involves requesting the waiver of debt only
from financial institutions having provided loans to Shiroganekai. No request for support
will be made with regard to trade debt. Therefore there will be no impact on tradecreditors.
9. Basis for decision to support
ETIC‟s basis for deciding to provide support is as follows.
(1) Rationale
Shiroganekai operates the Hayashi Hospital in Kanazawa City, Ishikawa Prefecture. All 164
authorized beds at the Hayashi Hospital are registered as sanatorium beds. Two wards aregeneral medical care wards and one a long-term medical care ward.
The central medical region in Ishikawa Prefecture, including Kanazawa City, is “overcapacity zone of beds”;however, the Hayashi Hospital itself is fully occupied at all times anda large number of patients are awaiting admission. The hospital is essential to the region,2

providing medical services to many elderly patients with chronic conditions that are difficult
to manage at home or in a general care setting, as well as specialist care for terminally illpatients.
In the event of bankruptcy where Hayashi Hospital should become unable to provide
medical services, there would be a severe impact on in-patients and others relying on thefacility, and on the wider regional community.
ETIC has accordingly come to make a judgement that supporting the revitalization of therecipient‟s business is to be justified and that should contribute to the stable provision ofmedical services for the local community.
(2) The Role of ETICIn deciding to support the Hayashi Hospital, ETIC‟s planned role is as follows:(1) Act as a coordinator among the financial institutions concerned (for debt purchase)(2) Facilitate the involvement of new financial institutions(3) Supply management personnel
With regard to (1) above, ETIC will reduce excessive interest-bearing debt by requestingsupport in the form of debt forgiveness from the financial institutions concerned andimprove the financial position of Shiroganekai.
With regard to (2), ETIC will contribute to stable fund procurement at Shiroganekai bybuilding a cooperative financing structure composed of the new main bank, First Bank ofToyama, and several other financial institutions, which will support Shiroganekai alongwith ETIC itself.
With regard to (3), ETIC will strengthen the management structure by providing
management personnel and enable the recipient to put in place the foundations neededto operate the Hayashi Hospital on a stable basis.
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Appendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support
1.1 Names of companies
Shiroganekai Medical Association (Hereafter “Shiroganekai”)/etc,
1.2 Main Business
Operation of the Hayashi Hospital
1.3 Main medical and geriatric facilities
The Hayashi Hospital: 164 beds
1.4 Facility location
1-2-27 Hommachi, Kanazawa-shi, Ishikawa-ken
1.5 Number of employees
Shiroganekai Medical Association: 116 (including 101 full-time employees and 15part-time employees)
1.6 Labor union
None
1.7

Affiliated companies
Shirogane Y.K.

1.8

Main banks
Aozora Loan Services, Hokuriku Shinkin Bank, The Hokkoku Bank, The Fukui Bank
(Ishikawa Guarantee)

1.9

Financial overview (financial results for year ended March 31, 2011)
Interest-bearing debt

¥4,262 million

Medical practice revenue¥1,026 million

Medical practice profit¥254 million(2) Background and circumstances leading to request for ETIC support
The Hayashi Hospital was established in 1969 by the late Seiichiro Hayashi. He
managed the hospital successfully, but conducted an other business in real estate
during the “bubble economy” period and was left with a severe debt burden. He later
died in 2005.
Mr. Hayashi‟s wife, Michiko Hayashi, herself a hospital doctor, wished to continue theHayashi Hospital, but inherited the medical and real estate operations as a private
business burdened with a severe excess of liabilities over assets.

4Michiko Hayashi then converted the privately owned hospital business into a medical
corporation under the name “Shiroganekai”, but the associated monthly-contract car
parking business could not be transferred to Shiroganekai under the provisions of theMedical Care Law. Accordingly, the large debts and real estate (hospital and carparking) assets continued to be privately held.
(3) Outline of the Business Revitalization Plan
1. Basic Policy
The heavy debts incurred as a result of failed real estate investments when the business
was privately owned will be restructured to ensure the continuation of the hospitalbusiness, which plays an important role in the region‟s medical care and which has
maintained stable profits both in the past and currently. The assets needed to run thehospital business and the debts commensurate thereto will be transferred toShiroganekai.
2.

Main Initiatives(1)

Initiatives to Boost Income
A number of measures will be put into effect, including the hiring of a physiotherapist
and appropriate calculation of fees for rehabilitation. Reimbursement fees pertaining
to patient nutritional therapy (administered by the nursing staff) will be calculated
appropriately.

(2)

Initiatives Related to Costs
A number of measures will be put into effect, including negotiations to bring prices
into line with suppliers offering high discounts in cases where pharmaceuticals arebeing sourced at premium prices. Corrections will be made in cases where theoutsourcing costs for meal provision, bedclothes and cleaning are out of line withmarket prices.

(3)

Administration and Personnel
Administration and management systems will be reorganized with the aim ofimplementing the switch from individual to corporate management. Systems will beestablished to enable consensus decision-making. Organization and regulations will
be overhauled to make decision making less bureaucratic and more transparent.
As regards personnel, additional full-time physicians, physiotherapists, pharmacists
and radiologists will be hired to improve the range and quality of medical care.
53.

Business Restructuring(1)

A De Facto “Second Company Restructuring”
This scheme is effectively a “second company restructuring”. The affected business
operators are in the midst of transforming the Hayashi Hospital from a privately runbusiness to a corporation. Michiko Hayashi will transfer all hospital assets toShiroganekai. As consideration for these assets, Shiroganekai will accept without
liability the portion of Michiko Hayashi‟s debt corresponding to the portion of hospital
assets that Shiroganekai is able to bear. Michiko Hayashi will thereafter liquidate theprivate business.

(2)

Fund Procurement from New Financial Institutions
Financial institutions with an existing relationship will terminate their businessconnection as a result of ETIC support. Shiroganekai needs to initiate transactions
with new financial institutions to procure funding. It has been agreed that The FirstBank of Toyama will be the main bank, with other financial institutions cooperating.

(3)

Establishment of a Car Parking Business Company
Of the car parking land managed by the affected business operators, a land site
adjacent to the Hayashi Hospital is the most favored site for the construction of a
new Hayashi Hospital. Accordingly, it will not be sold to a third party. Almost all thecar-parking operations are monthly contract car parks which are not allowed to beoperated as businesses by a medical corporation. Therefore a new company will be
set up to take over the car parking business.

(4)

Request for Support from Creditors
The business operators will request debt forgiveness amounting to ¥2,822 million
out of the total affected assets of ¥4,185 million from concerned financial institutions
as defined under article 6, Clause 1, “Financial Institutions Requesting FinancialSupport”.

(5)

Plans for Funds
Shiroganekai‟s operating cash flow will be applied to the funding of redemptions as
defined in this restructuring plan.

Section 4. Conformance with standards for support
6This business revitalization plan meets ETIC‟s standards for support.
1. Main clauses in standards for support
1.1 Possession of effective management resources
Hayashi Hospital features a post intensive care unit, and provides care for a highnumber of patients suffering from chronic illnesses, for which beds are insufficient in
the region. The hospital provides medical care to elderly patients who have illnesses
that are difficult to manage at home or in a general care setting, as well as specialist
care for terminally ill patients, and as such makes a significant contribution to themedical functions of Kanazawa city.
Furthermore, the hospital has a sufficient number of physicians, nurses and carespecialists for the operation of this hospital, which deals with many chronically illpatients requiring intensive-level medical treatment as well as chronically ill patientsrequiring high-level nursing care.
1.2 Excessive indebtedness
Shiroganekai carries an excessive amount of debt compared to its revenues. Debt
forgiveness and financial support are essential to the revitalization of Shiroganekai.
2. Standards relating to decision to support
2.1 Agreement of main creditors
The application by Shiroganekai was made jointly with Aozora Loan Services and newcreditor, First Bank of Toyama.
2.2 Standards for productivity improvement
Successful implementation of this business revitalization plan is expected to enable
Shiroganekai to meet the required standards with respect to productivity.
2.3 Standards for financial soundness
Successful implementation of this business revitalization plan is expected to enable
Shiroganekai to meet the required standards with respect to financial soundness.
3. Comparison with liquidation value
The value of Shiroganekai available through implementation of the business
revitalization plan is estimated to be greater than the value available through debt
recovery on bankruptcy or civil rehabilitation proceedings.
7

4. Potential to refinance within three years
Implementation of the business revitalization plan is expected to significantly improve
the financial condition of Shiroganekai and enable it to fund redemptions fromsustainable cash flow.
5. Connection with structural oversupply
Implementation of the business revitalization plan will not increase the supply capacityof Shiroganekai. 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.
6. Status of consultations with workforce
As the company does not have an employees union it is planned that meetings withemployees will be scheduled promptly after announcement of the decision to provide
support, and opportunities provided to discuss employment conditions and otheraspects of the business revitalization plan.
Section 5: Responsibility of management and governance
1. Responsibility of directors
All current directors of Shiroganekai will resign from their positions, and their directors‟
retirement benefits will be removed.
Hereafter Dr. Ichiro Matsuda, who will continue the operations of Shiroganekai, willassume a new role as chairperson.
Although Michiko Hayashi will retire from her role as director, it is planned that she willremain working as a full-time doctor with a role as honorary hospital director.
2. Responsibility of investors
As there are no investors in Shiroganekai, and no creditors with equity interest, it istherefore not necessary to consider the responsibility of investors.

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