ETIC to Provide Support to Zenjinkai Medical Corporation
August 24th 2010
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”), has decided to provide
support to Zenjinkai Medical Corporation under Article 25, Clause 4 of the Enterprise
Turnaround Initiative Corporation of Japan Act (Act 63, of 2009, hereafter “the ETIC Act”),
1. Name(s) of persons or companies concerned
Zenjinkai Medical Corporation (hereafter “Zenjinkai”)
2. Name(s) of financial institutions jointly applying for rehabilitation support with ZenjinkaiTokyo Challenge Fund Limited Partnership for Investment
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 plan. However, I ask
that after reaching the decision to support, ETIC should promptly encourage Zenjinkai todiscuss the situation with employees of the companies as soon as possible. I also askthat in advising on and guiding the implementation of the corporate revitalization plan,ETIC should aim to ensure that Zenjinkai Medical complies with related laws andregulations, and that Zenjinkai Medical also provides adequate opportunities for
substantive discussions between it and the workforce.”
5. Comment from state minister supervising business activities
Minister of Health, Labour and Welfare: “Zenjinkai provides necessary inpatient careand other long-term medical services for people in the southern Kita Tama healthcarearea, which is an area that does not contain excess sickbeds. I therefore have noobjection to the decision to provide support.
In carrying out the revitalization plan, I ask that ETIC respects the opinion of theGovernor of Tokyo, who is working to secure the provision of appropriate medical
services in the region, and makes every effort to ensure that necessary medical services

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can continue to be provided.”
6. Debt purchase application period
From Tuesday, August 24th, 2010 for receipt by ETIC no later than Wednesday,
September 29th, 2010.
*Under this agreement, no debt purchasing will take place. Accordingly the stated debt
purchase application period refers to the amount of time to agree on the control anddisposal of debt in accordance with the business revitalization plan (Article 26, Clause 1,Paragraph 2 of the ETIC Act).
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 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 fromfinancial institutions providing loans to Zenjinkai. No request for support will be madewith regard to trade debt. Therefore there will be no impact on trade and generalcreditors.
9. Basis for decision to support
ETIC’s basis for deciding to provide support is as follows.
9.1 Rationale
Zenjinkai is a corporation operating geriatric healthcare institutions in Chofu City. The
medical and care facilities operated by Zenjinkai provide local residents with medicaland nursing care services, and have a high degree of community involvement.
Zenjinkai contribution to the community is particularly important with respect to the factthat the corporation (1) focuses heavily on providing medical and nursing services forthe elderly, and (2) is the only geriatric healthcare facility in Chofu shi, which isincluded with the wider southern Kita-Tama region, is facing a shortage of healthcare
facilities.
The collapse of Zenjinkai would have a severe impact on local communities. The
inability to provide necessary medical and nursing services would greatly affect2

inpatients, outpatients and others relying on the facility.
Zenjinkai possesses useful business resources, including a sufficient number ofhospital staff, such as doctors and nurses, necessary to ensure the maintenance anddevelopment of hospital functions. Moreover, the hospital building complex is locatedin a highly convenient area in central Chofu City, near to a train station, which isadvantageous for securing patient and staff numbers, and the building is adequate tofacilitate the hospital over the medium- to long- term, eliminating the necessity forlarge amounts of capital investment.
ETIC expects Zenjinkai to make a fast recovery by utilizing these business resources,and through receiving support from sponsor Heiseihakuaikai Medical Corporation,
which has abundant expertise in geriatric healthcare. Accordingly, ETIC hasdetermined that there is ample merit in supporting the revitalization of Zenjinkai as ameans of contributing to the stable provision of medical and nursing services inregional society.
Moreover, by undertaking this support program ETIC aims to create a useful business
transfer model for hospitals with geriatric facilities that are scheduled to bediscontinued in March 2012, as well as a model for private revitalization of medical
corporations, of which there are relatively few examples in Japan.
9.2 Role of ETICIn deciding to support Zenjinkai, ETIC will pursue the smooth progress of therevitalization plan, by coordinating activities which Zenjinkai would have found difficult
to execute alone, including reconciling the interests of the related financial institutions,
sponsors, and other related parties from a fair and neutral standpoint.

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Appendix: Outline of the Business Revitalization PlanSection 1: Overview of the companies receiving support
1.1 Names of companiesZenjinkai Medical Corporation (hereafter, “Zenjinkai”)
1.2

Main business
Operation of a hospital, visiting nurse station, and day service center

1.3

Main facilities(1) Tamagawa Hospital
5-31-1 Kokuryo-Cho, Chofu shi, Tokyo(2) Tamagawa Visiting Nurse Station
5-31-1 Kokuryo-Cho, Chofu shi, Tokyo(3) Tamagawa Day Service Center
5-31-1 Kokuryo-Cho, Chofu shi, Tokyo

1.4

Head office
5-31-1 Kokuryo-Cho, Chofu shi, Tokyo

1.5

Number of employees
Full-time: 119 (including 5 doctors and 27 nurses/assistant nurses)
Temporary: 62 (including 10 doctors, 28 nurses/assistant nurses)

1.6

Labor union
A labor union exists and is affiliated with the Japan Federation of Medical Worker’sUnions

1.7

Affiliated companies
Tamagawa Medical Service Co., Ltd.

1.8

Main banks
Tokyo Challenge Fund Limited Partnership for Investment
NLC Japan Co., Ltd.
Credit Guarantee Corporation of Tokyo
The Tama Shinkin Bank

1.9

Financial overview (financial results for year ended March 31, 2010)
Medical practice revenue¥1,485 million

Operating profit¥102 million

Interest-bearing debt

¥2,430 million

Section 2: Background and circumstances leading to request for ETIC support
Deriving from a medical clinic established in 1929 Zenjinkai operates a hospital, a visitor

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nurse station, and a day service center in Chofu City, Tokyo, particularly focusing on
providing medical and nursing services for the elderly.
Zenjinkai has operated as a medical and geriatric healthcare institution in the region for over
80 years, but around 1983, Zenjinkai made the decision to undergo large-scale expansion,and took out a large loan to fund the expansion, with no guarantee of future business return.
Consequently, Zenjinkai was unable to withstand the large interest payments. Changes
were made to loan repayment conditions, and Zenjinkai attempted a transformation into a
geriatric healthcare facility with the aim of balancing payments and expenditures. However,changes to governmental policy led to a reduction in medical income, which caused
problems with cash flow to the point where repayment commitments and bonus funds, could
not be secured.
However, the collapse of Zenjinkai would have a severe impact on inpatients, outpatients,and others relying on the facility, and significantly impair the ability to provide necessary
medical and nursing services in the local communities.
To avoid this outcome, Zenjinkai made the decision to apply for support from ETIC in aneffort to enable sound and rapid revitalization. Zenjinkai will transfer business to Daiwakai
Medical Corporation (Daiwakai) to plan and implement comprehensive business
revitalization, incorporating the elimination of excessive debt, a shift in facility functionality,
and the creation of management control functions.

Section 3: Outline of business revitalization plan
1. Basic policy
The business revitalization plan will utilize the expertise and credit capabilities ofsponsors and revitalize the current medical staff to enable the provision of medical
and nursing services that match the local needs and healthcare systems, ensuring
the continuity of the hospital and elderly care facility in the region.
2. Main Initiatives(1)

Transformation of hospital functions
Authorized sickbeds which are the basis of income for Zenjinkai, are all currently
managed as geriatric nursing care wards. However in order to increase income,these wards will be transformed by stages into medical treatment wards.
Consideration will be taken of the increased personnel costs from additional nursing
staff required as a result of this transformation.

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(2)

Development of management control functions
Zenjinkai had many problems with its management controls, and when the decision
was made to undergo large-scale expansion in 1983, it borrowed large amounts ofmoney with no sound prospect of business revenues.
Zenjinkai is expected to achieve solid business improvements through the transferof all of its business to Daiwakai, and by being placed under the management
control of Heiseihakuaikai Corporation, which possesses strong, geriatriccare-focused management foundations.

3. Request for financial support
Of the ¥2.4 billion owed to financial institutions and others by Zenjinkai, financial
support of approximately ¥1.6 billion will be requested from financial institutions andothers.

Section 4. Conformance with standards for support
1. Requirements related to standards of support(1) Useful business resources
Zenjinkai possesses useful business resources in that it retains sufficient hospital staff
numbers such as doctors and nurses, is located in a highly convenient area, in acomplex which is adequate to facilitate the hospital over the medium- to long-term.
(2) Excessive debt
Zenjinkai bears excessive debt in relation to its profit earning capacity, to the point
where it is necessary for it to receive financial support, such as disposal of liabilities, inorder to conduct business revitalization through transfer of businesses.
2. Requirements related to decision to provide support(1) Conformance with application for support
Zenjinkai made a joint application for support with Tokyo Challenge Fund Limited
Partnership for Investment.
(2) Standards for productivity improvement
The Enterprise Turnaround Initiative Corporation of Japan Support Standards(hereafter “Support Standards”) require that Zenjinkai either increases ROE by atleast two percentage points, increases the tangible fixed asset turnover ratio by atleast five percentage points, or increases the value-add per employee by at least six
percentage points within three years of the day of the decision to provide support. As
a result of the implementation of the business revitalization plan, Zenjinkai isexpected to improve the operating profit ratio before depreciation by at least two6

percentage points, and increase the ROE by at least five percentage points within
three years of the day of the decision to provide support. Accordingly, the business
revitalization plan is deemed to be meeting the standards for productivity
improvement.
(3) Standards for financial soundness
The standards for financial support stipulate that the ratio of interest-bearing debt tocash flow should be within ten times, and current revenues should be greater thancurrent expenses within three years of the day of the decision to provide support. As
a result of the implementation of the business revitalization plan, Zenjinkai isexpected to meet all of these standards. Accordingly, the business revitalization planis deemed to be meeting the standards for financial soundness.
(4) Comparison with liquidation value
The liabilities expected to be recovered through the execution of this business
revitalization plan exceed the estimated liabilities that could be recovered fromconducting bankruptcy proceedings.
(5) Potential to refinance within three years
EITC will not conduct financing, capital injection, or a buyout in this particular
scheme.
(6) Connection with structural oversupply
Under the business revitalization plan, there will be no attempt to increase thesupply capacity of Zenjinkai. Accordingly, the plan has been judged as not hindering
the resolution of structural oversupply as specified in Article 19 of the Act on Special
Measures for Industrial Revitalization.
(7) Consultation with workforce
There is a labor union at Zenjinkai. As part of the revitalization process, it is planned
that meetings with labor union representatives and members will be scheduled
promptly after announcement of the decision to provide support, and opportunities
provided to discuss aspects of the business revitalization plan.

Section 5. Responsibility of management and investors
1. Responsibility of management(1) Following the approval of the business revitalization plan, the business transfer will7

be conducted and Zenjinkai will go into liquidation proceedings. Following theconclusion of liquidation proceedings, all executive staff will forfeit their positions as
executive officers. Executive staff of Zenjinkai will not become executive officers ofthe business transferee, Daiwakai.
(2) Removal of right of claim for retirement benefits for executive officers
All rights of executive officers to claim for retirement benefits will be removed.
2. Responsibility of investors
Under the liquidation proceedings, the residual assets of Zenjinkai will not be distributed tothe three investors, the Director and his sons. By this operation, the three will bear their
responsibilities as investors.
ENDS

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