ETIC decides to support Yamanishi Co., Ltd.
February 9, 2012
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Yamanishi Co., 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
Yamanishi Co., Ltd. (Hereafter, “Yamanishi”)

2．Name of financial institution jointly applying for rehabilitation support with Yamanishi
The 77 Bank, Ltd. (Hereafter, “77 Bank”)

3．Outline of business revitalization plan
Please see appendix

4．Comment from State Ministers in charge of ETIC
Prime Minister, Minister of Internal Affairs, Minister of Finance: No opinion
expressed
Minister of Health, Labour and Welfare: “I have no objection to the decision tosupport Yamanishi. However, I ask that after reaching the decision
to support, ETIC should encourage Yamanishi to discuss thesituation with employees as soon as possible. I also ask that inadvising on and guiding the implementation of the corporate
revitalization plan, ETIC should aim to ensure that Yamanishicomplies with related laws and regulations, and that the company
also provides adequate opportunities for substantive discussions
with the workforce with due consideration of employment stability
and other such factors.”
Minister of Economy, Trade and Industry: “I hope that the revitalization ofYamanishi‟s business can contribute to the speedy restoration of
the local economy and society, so that residents can once again
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live without anxiety. Due consideration should also be given to theimpact on trading partners of Yamanishi.”

5．Comment from State Ministers supervising business activities
Minister of Land, Infrastructure, Transport and Tourism: ”Not only is Yamanishi theonly ship builder in southern Tohoku that is capable of building
large commercial ships, it also plays a major role in maintaining
and developing the local marine industry.
Many small-scale marine businesses that build and repair
fishing boats rely on Yamanishi for the base load of their business,and through the formation of a wide trade network, the industry has
worked to maintain industry scale and improve technologicalstandards. Yamanishi holds trade relationships with several local
companies in Ishinomaki City, and has maintained a significant rolein supporting local employment and the local economy, not only
through the company itself but also through the companies that itholds relationships with.
As mentioned above, the revitalization of Yamanishi is vital forthe future development of the expanding marine-related industry in
the Tohoku region, and as a leader for economic recovery in
Ishinomaki City, it is considered to be of extremely high importance.
I hope to see steady progress in the business revitalization plan.”

6．Debt purchase application period
From Thursday February 9, 2012 for receipt by ETIC no later than Thursday March 29,2012.

7．Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, financial institutions have been requested not torecover loans or exercise any other rights they may have as creditors, other than thosepermitted 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 foregiving of debt and othersuch measures from the financial institutions and lease companies providing loans or leases
2to Yamanishi. No request for support will be made with regard to trade debt. Therefore there
will be no impact on trade creditors.

9．Basis for decision to support
ETIC‟s basis for deciding to provide support is as follows.
9.1 Rationale
With a history dating back 90 years, Yamanishi is one of Japan‟s foremost coastal
shipbuilders, having built up a strong customer base and technological base inIshinomaki region. Yamanishi was historically known as Hokutensen-no-Yamanishi(Yamanishi Northern Pacific Long-Distance Ocean Trawlers), a builder of strong ships
which could withstand rough seas, and the company‟s reputation for high-quality
products continues to be extremely strong today. Yamanishi plays an important role informing the foundations of the shipbuilding industrial cluster in Ishinomaki, and has amajor influence on the industrial cluster and employment in the region.
Yamanishi suffered substantial damage as a result of the tsunami caused by the Great
East Japan Earthquake in March 11, 2011. However, the company‟s strong customer andtechnological base has remained untarnished, and considering that Yamanishi continues
to possess effective management resources for Ishinomaki region following the disaster,
ETIC has determined that there is ample merit in supporting the revitalization ofYamanishi. The company can contribute to the revitalization of regional employment andother aspects of regional business, through the sustainable recovery of the shipbuilding
industrial cluster in the Ishinomaki region.
9.2 Role of ETICIn deciding to support Yamanishi, ETIC will be actively involved in the development of
the business revitalization plan, and will promote smooth progress of the revitalization
plan by facilitating the provision of additional capital from 77 Bank and others, andcoordinating activities which Yamanishi would have found difficult to execute alone.
Under this business revitalization plan, ETIC will not purchase debt from financial
institutions, and will not provide financing or a capital injection.
ENDS

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Appendix: Outline of Business Revitalization PlanSection 1: Overview of company receiving support
1.1 Name of company
Yamanishi Co., Ltd. (Hereafter, “Yamanishi”)
1.2 Headquarters
1-2 Nishihama-cho, Ishinomaki-shi, Miyagi-ken
1.3 Date establishedMarch 23, 1920
1.4 Capital¥100 million
1.5 Shareholders
Yamanishi Mochikabukai (11.3% share), 77 Bank Ltd. (5% share), others
1.6 Main business
Ship building, ship repair, and steel structure production
1.7 Number of employees
Full-time employees: 202 (including 24 temporary staff) (as of December 31, 2012)
1.8 Main facilities
Head office, Tokyo office, Ishinomaki branch office
1.9 Main banks and other financing organizations
The 77 Bank Ltd.
1.10 Financial Overview
FY2011/3Sales¥16,191 million

Ordinary income(¥459 million)

Net income(¥3,098 million)

Net assets(¥1,799 million)

Total assets¥13,188 million

Section 2: Background and circumstances leading to request for ETIC support
Amidst a sharp downturn in the business environment, with continued appreciation of theyen stemming from global economic changes, and a downturn in demand for ships,
Yamanishi suffered extensive damage to its production facilities as a result of the Great East
Japan Earthquake and tsunami, bringing production operations to an almost complete halt
at its main plant. Extensive damage was suffered, including some partially completed ships
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that were destroyed by the tsunami.
In order to restart operations and achieve a recovery, Yamanishi will require a substantial
amount of funding for operations and capital investment. Considering that financial support
will be necessary in order to receive new loans, and after discussions with its main bank 77
Bank, Yamanishi resolved to apply for support from ETIC.
Section 3: Outline of business revitalization plan

1．Basic policy(1) Restoration of facilities
Yamanishi must quickly implement the restoration of its facilities after the extensive
damage caused by the Great East Japan Earthquake and tsunami.

(2)Core business plan
① Establish a model for the sustainable recovery of the Ishinomaki shipbuilding
industrial cluster
In order to create a steady and sustainable recovery of business, the shipbuilding
capacity will be comprehensively reformed and downsized compared to its statusprior to the earthquake. Specifically, close attention will be given to the assessment
and close management of processes and variable costs associated with each typeof work in the construction process, with the aim of creating a flexible structure thatminimizes losses from unutilized capacity while enabling profitable operations on
the basis of receiving orders and undertaking construction of two vessels per year.
A critical element in achieving the recovery and ongoing sustainability of Yamanishi
will be securing the cooperation and collaboration of other companies thatcomprise the important shipbuilding industrial cluster in the Ishinomaki region.
Accordingly, cooperative arrangements will be made with cluster companies toguarantee a certain volume and period of work per year.
② Rapid restoration of damaged facilities
In working to maintain and improve the enterprise value of Yamanishi it is vital thatfacilities be restored without delay. Reconstruction work will commence as soon as
possible, with a target of completing the head office and Omagari factory by5

September 2012 and finishing post-restoration construction of the first vessel tocontract specification by March 2013.
③ Flexibly adjust focus of ship building expertise according to market demand
Overseas market demand and pricing for vessels varies according to global freight
volumes and foreign currency exchange rates. Meanwhile, demand in thedomestic market is expected to arise from the need to replace older vessels.
Accordingly, the strategy for external markets will be to maintain a close watch on
exchange rates and other factors influencing demand, and sales efforts will for thepresent time be focused on the domestic market.
④ Comprehensively strengthen cost competitiveness
While pursuing high levels of product quality, thorough measures will be taken todevelop a structure that addresses previous deficiencies in purchasing and cost
control. These measures will include taking a unified approach to reforming
productivity during planning and production, significantly improving unit priceplanning and administration, strengthening production technology, reducing
personnel levels in accordance with the downsizing of production capacity
required to ensure stable recovery and sustainability, and rigorously reducing
costs, including expenses and procurement costs.
(3) Reform of management structure and personnel policy
Reforms will be introduced to reconstruct the governance system, clarify management
indices and define progress markers.
2. Business restructuring
This business revitalization plan does not include plans for business restructuring.
3. Request for financial support from financial institutions, etc.
First, financial institutions with outstanding loans to Yamanishi will be requested to forgive
approximately ¥7.9 billion of the total of approximately ¥8.2 billion in loans owed to thoseinstitutions by Yamanishi. (The exact amounts of financial support are subject to change
according to the amount of loan repayment achieved through the sale of non-core realestate.) It is planned that the loans remaining after implementation of debt forgiveness will
be repaid in full on the final day of March 2013.

6With regard to financial institutions operating lease agreements with Yamanishi, debt
forgiveness will be sought for approximately ¥200 million of the approximately ¥200 millionof leased items destroyed in the earthquake and tsunami, and a request for payment
rescheduling will be made for remaining amounts.
In addition, for finance provided to Yamanishi since March 11, 2011 by Japan FinanceCorporation totaling ¥550 million, a request will be made to Japan Finance Corporation tochange the loan conditions to enable capital management (capital loan) via a debt-to-debt
swap.
4. Capital management and requests to 77 Bank.
It is planned that for the period between ETIC deciding to support Yamanishi and the date ofdecision on debt acquisition, a maximum of ¥4.1 billion for capital expenditure and amaximum of ¥4.1 billion in working capital will be procured from 77 Bank.
After the date of decision on debt purchase, it is planned that 77 Bank will, assuming that
Yamanishi is making every effort it can under its own resources, provide the working capitalnecessary for implementation of the business revitalization plan (envisaged as a maximumof ¥9.5 billion for the period until March 2013, and a maximum of ¥6.9 billion from April 2013
onward). Of this working capital, it is planned that loan conditions for approximately ¥3.45billion will, during the period of the business revitalization plan, be changed to a loan of acapital nature (capital loan).
Yamanishi is also considering requesting loans and capital injection from other financial
institutions, and if such funding of a robust capital nature is procured from other financial
institutions, it is planned that the amount of financing requested from 77 Bank will be
reduced while reducing the amount for which a change in loan conditions to capital-typeloans is requested.
Section 4. Conformance with standards for support
1. Requirements related to standards of support(1) Possession of effective management resources
With a history dating back 90 years, Yamanishi is one of Japan‟s foremost costal
shipbuilders, having built up a strong customer base and technological base in
Ishinomaki region. Yamanishi was historically known as Hokutensen-no-Yamanishi(Yamanishi Northern Pacific Long-Distance Ocean Trawlers), a builder of strongships which could withstand rough seas, and the company‟s reputation for7

high-quality products continues to be extremely strong today. Accordingly, Yamanishi
is considered to possess effective management resources.
(2) Excessive indebtedness
Yamanishi carries an excessive amount of debt compared to revenues. Financial
support is essential to the revitalization of the Yamanishi.
2. Conformance with standards for support(1) Agreement of main creditors
The Yamanishi made a joint application for support with core creditor The 77 BankLtd.
(2) Standard for productivity improvement
Successful implementation of this business revitalization plan is expected to increase
productivity.
(3) Standards for financial soundness
Successful implementation of this business revitalization plan is expected to enable
Yamanishi to meet the required standards with respect to financial soundness.
3. Comparison with liquidation value
The value of Yamanishi‟s debt upon implementation of the business revitalization plan isestimated to be more than the value available through liquidation.
4.Potential to refinance within three years
There are no plans to conduct financing, capital injection, or debt purchase by ETIC aspart of this business revitalization plan.
5.Connection with structural oversupply
Implementation of the business revitalization plan will lead to the substantial downsizingof construction capacity of Yamanishi, contributing to a reduction in structural oversupply.
Accordingly, the plan has been judged as „not hindering the resolution 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
It is planned that meetings with the union will be scheduled promptly after
announcement of the decision to provide support, and opportunities provided to discuss
employment conditions and other aspects of the business revitalization plan.
Section 5: Responsibility of management
In consideration of the fact that Yamanishi‟s difficulties have been caused by significant
changes in the business environment, including damage caused by the Great East Japan8

Earthquake and resulting tsunami along with the strong yen, there are no plans to pursue
measures reflecting the responsibility of management. However, given the current situationin which the management is placed, it is planned that directors will voluntarily reduce theirremuneration, while additional director remuneration will be reduced with due consideration
to the company‟s request for financial support.
Section 6: Responsibility of shareholders
In consideration of the significant changes in the business environment, including damage
caused by the Great East Japan Earthquake and resulting tsunami, and the strong yen, thebusiness revitalization plan does not include plans to pursue measures reflecting theresponsibility of shareholders.
ENDS

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