ETIC to provide support to Senoh Corporation
March 26th 2010
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Senoh Corporation and related companies listed below, under Article 25, Clause
4 of the Enterprise Turnaround Initiative Corporation of Japan Act (Act 63, enacted in 2009,
hereafter “the ETIC Act”).
1. Name(s) of persons or companies concerned
Senoh Corporation, Senotech Corporation, Senoh Maintenance Service Corporation, andUpsen Corporation (hereafter collectively “the Senoh Companies”)

2. Name(s) of financial institutions jointly applying for rehabilitation support with the Subject
Companies

Resona Bank, Limited
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 tosupport, ETIC moves quickly to discuss the situation with employees of the companies. I
also ask that in advising on and guiding the implementation of the corporaterevitalization plan, ETIC gives appropriate consideration compliance with related laws
and regulations and holding discussions with the workforce.”
5. Comment from state ministers supervising business activities
Minister of Economy, Trade and Industry:“The manufacture and sale of sporting equipment for schools and public facilities islinked to the growth of the health-related industry, and is an important element of ournation’s economic society. I believe that the revitalization of this internationallyrecognized business is of great importance, and I hope that steady progress inrevitalization should be achieved.”
6. Debt purchase application period
From Friday, March 26, 2010 for receipt by ETIC no later than Monday May 31, 2010.
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.

Page 1 of 8

8. Treatment of trade and general creditors
The decision by ETIC to provide support involves requesting financial support only fromfinancial institutions providing loans to the Senoh Companies. There will be no impact on
trade and general creditors.
9. Basis for decision to support
ETIC’s basis for deciding to provide support is as follows.
9.1 Rationale
The Senoh Companies specialize in (1) sports-related equipment supply, (2)training-related equipment supply, and (3) installation and maintenance, with a corecustomer base of schools and public gymnasiums.
Products and maintenance services provided by the Senoh Companies are a vital partof promoting sporting activity in the community, and the companies have a highdegree of community engagement. The Senoh Companies have a strong customer
base, with a particularly large market share for competition equipment used in highschools, universities, and public gymnasiums, making them a social support
mechanism for competitive sports in Japan. With all of their gymnastics, volleyball andbasketball equipment approved by the International Sports Federation, the Senoh
Companies contribute to the development of competitive sports in Japan as official
suppliers of Olympic events and a variety of other international sports events.
If the Senoh Companies were to reach the stage of bankruptcy, this element of social
infrastructure would cease to exist, causing widespread disruption in schools andpublic gymnasiums and potentially throughout the sports market, with an adverse
affect on the promotion of physical exercise and health in this country. Moreover, there
would be a significant impact on existing clients requiring maintenance andcomponent supply (including around 10,000 schools and 3,500 gymnasium facilities),
product suppliers (around 450 companies), and the nearly 400 employees of theSenoh Companies.
ETIC believes that providing support for the revitalization of the Senoh Companies
should help stimulate regional economies and contribute to the development ofJapanese lifestyles and society.
9.2 Role of ETIC
ETIC, after completion of debt restructuring at the Senoh Companies, will purchase allremaining debt associated with operations of a new company to be formed through acompany separation (absorption separation) in which all the business operations ofSenoh will be transferred and continued.
ETIC, as the 100% owner of the new company, will develop a corporate governancestructure, and through placement of management personnel will implement a
management and administrative system. ETIC will also support the ongoing

Page 2 of 8

revitalization of Senoh by providing the new company with a capital injection of¥400.0 million for the purposes of business restructuring, capital expenditure and othersuch activities, and as necessary will guarantee a certain level of lending by main
financial institutions for working capital
ENDS* Please see attached appendix for Outline of Business Revitalization Plan

Page 3 of 8

Appendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support
1.1 Names of companies
Senoh Corporation (hereafter, “Senoh”), Senotech Corporation, Senoh
Maintenance Service Corporation, and Upsen Corporation (collectively, “the SenohCompanies”). Unless stated otherwise, the following overview refers to Senoh.
1.2 Head office
250 Matsuhidai, Matsudo-shi, Chiba 270-2214 Japan
Registered address: Shinagawa 2-2-13, Minami Shinagawa, Shinagawa-ku, Tokyo
1.3 Date of establishment
January 19, 1946 (founded April 1908)
1.4 Capitalization¥156 million
1.5 Share information
Total authorized shares: 10,000 shares
Total shares outstanding: 2,730 shares
1.6 Principal shareholders (as of end February 2010)Owner

Relationship

Shares held

Percentage of total

Kazuo Senoh

CEO780

28.6%

Senotech Corporation

Subsidiary

502

18.4%

Yamanaka Corporation

Supplier

200

7.3%

Senoh Electronics Corporation

Affiliated company

111

4.1%

1.7

Main business
Manufacture and sale of sports and training-related equipment
Installation and maintenance operations
1.8 Number of employees
410 (Group total, as of December 31, 2009)
1.9 Main locations
Sapporo, Sendai, Kanto-Shinetsu, Tokyo, Yokohama, Nagoya, Osaka, Hiroshima,Fukuoka
1.10 Main banks
Resona Bank, Limited; Gunma Bank, Ltd.; others
1.11 Affiliated companies
Senoh Electronics Corporation; Akutasu Corporation (dormant company); Qing Dao
Senoh Sporting Goods Co., Ltd. (manufacturing plant in China)
1.12 Financial overview (financial results as of year ended March 31, 2009)
Net sales¥11,383.85 million
Gross profit¥2,098.75 million
Ordinary income¥88.0 million
Operating loss(¥181.38 million)
Net assets¥813.58 million

Total assets¥11,297.38 million

Page 4 of 8

Section 2: Background and circumstances leading to request for ETIC support
Established as a company specializing in the manufacture and sale of gymnastics
equipment, the Senoh Companies’ products were internationally certified at the 1964 Tokyo
Olympics, which solidified their position as a top organization for competitive indoor sports
and allowed them to expand to be a major support mechanism for gymnasium infrastructure.
From around the 1990s, the Senoh Companies expanded into the manufacture and sale oftraining-related equipment. This was supplemented by the development of an installationand maintenance operation, and the companies grew to post sales of well over ¥10 billion
yen.
However, at the same time as starting the manufacture and sales of training-related
equipment, the Senoh Companies developed a construction and installation business thatwas conducted without sufficient know-how or structure. This business soon brought abouta major loss—part of which was disguised. Furthermore, the Senoh Companies
experienced hard times in their main line of business as a result of the downturn of thedomestic economy and a further declining national birthrate. As revenue decreased, theSenoh Companies were unable to improve cost structures, causing a downward trend inearnings. For fear of affecting their clientele, the Senoh Companies repeatedly madewindow-dressing settlements of accounts, which ultimately resulted in Senoh fall into thesituation, with excessive debt of ¥6.5 billion by the end of September 2009.
Profits further worsened as the recession hit in 2008, and having a financial structure that
excessively depended on borrowing, the Senoh Companies dropped into extreme financialinstability. The Senoh Companies then received cooperation from financial organizations topostpone principal and interest payments, but were already experiencing considerable
difficulty making any major improvements to their financial structure.
Meanwhile, as the Senoh Companies expanded to support Japan’s gymnasium
infrastructure, there was increasing concern about the large number of clients, including
financial organizations, which would be greatly affected if the Senoh Companies wentbankrupt.
In order to resolve this situation, the Senoh Companies consulted with their principal
financial organization, Resona Bank, and agreed to apply to ETIC to undergo a drastic
reconstruction through a transparent and fair process with the support of ETIC, while
minimizing damage to enterprise value and working to maximize the value of the Senoh
Companies’ group debt held by financial institutions.
Section 3: Outline of business revitalization plan
1. Business plan
1.1 Basic policy
While making drastic revisions to correct the primary causes of the Senoh
Companies’ predicament, the business plan will seek to optimize the competitive
strengths of the Senoh Companies, continue to contribute to the development ofcompetitive sports, and support the regional development of social environments
conducive to physical exercise and health.

Page 5 of 81.2 Specific initiatives
i. Organizational management structure and personnel policy reforma. Strengthen management function
Under the direction of a new CEO brought in from outside the companies, steps
will be taken to improve management efficiency and enhance thedecision-making process, while strengthening the strategic planning anddecision-making functions of the board of directors.
b. Develop function-specific organizational design
Responsibilities and authority will be clarified and the organization simplified
through a reduction of management layers and positions. At the same time,targets will be established by function for each area of the organization and aperformance-based appraisal system will be introduced.
ii. Comprehensive review of high cost structure
Costs will be addressed through measures to optimize the organizational andpersonnel framework, procurement and expenses, and the pricing of products andservices.
iii. Redistribution of management resources
For training operations, the less competitive general retail supply division will bereduced, and more resources will be allocated to the public supply division.
Resources will continue to be allocated to sports operations for it to staycompetitive. A certain level of resources will also be allocated to the developmentof new markets, such as the medical welfare field, that show growth potential.
2. Business restructuring
All external debt of the Senoh Companies, other than that of Senoh Corporation, willthrough a liability transfer be concentrated in Senoh Corporation, after which Senoh
Corporation will establish a new wholly owned subsidiary (hereafter, the “New Company”).
All the existing business operations of the Senoh Companies will be transferred throughcompany separation (absorption separation) to the New Company. After the company
separation, Senoh Corporation (hereafter, the “Old Company”) will be liquidated throughspecial liquidation proceedings (second company method).
Prior to implementation of the company separation, Senoh Corporation will transfer toETIC all shares in the New Company, and the New Company will become a 100%
subsidiary of ETIC. After the company separation, the New Company will receive a¥400 million capital increase from ETIC to finance restructuring costs, capital expenditureand other such items.
The Senoh Companies plan to file an application for recognition under the Revitalization
Plan for Small and Medium Enterprises, defined in Article 39, Clause 2 of the Act on
Special Measures for Industrial Revitalization and Industrial Innovation (Law 131, enacted1999).

Page 6 of 8

3. Request for financial support
Of the ¥7.8 billion owed to financial institutions by the Senoh Companies, financial
support of approximately ¥4.8 billion will be requested to financial institutions (effectivedebt forgiveness through the Second Company method).
4. Financing
Financing of the business is expected to be sufficient, provided that financial support isreceived in line with the business revitalization plan, along with seasonal financing andthe capital injection from ETIC.
5. Quantitative targets
Sales in the year ending March 2013 are expected to be slightly less than current sales,with estimated operating income for the same year of ¥137 million. Although the Senoh
Companies do not compile consolidated financial results, by way of reference,
consolidated operating income for the same period is estimated at ¥253 million.

Section 4. Conformance with standards for support
1. Possession of effective management resources
As a specialist in the manufacture and sales of sports-related equipment andtraining-related equipment, the Senoh Companies have the following three effective
management resources.
1.1

The Senoh Companies have a strong customer base, particularly backed by a large
market share for competition equipment in high schools, universities, and publicgymnasiums, making them a social support mechanism for competitive sports inJapan.

1.2

The International Sports Federation officially approves all gymnastics, volleyballand basketball equipment manufactured by the Senoh Companies, and they
contribute to the development of competitive sports in Japan.

1.3

As a domestic brand, the Senoh Companies possess a nationwide maintenancenetwork, and are involved in the development of physical exercise and healtharound the country.

2. Excessive indebtedness
The Senoh Companies carry ¥7.8 billion of interest-bearing debt, an excessive amountcompared to revenues. Debt forgiveness and financial support are essential to therevitalization of the Senoh Companies.
3. Factors confirming potential for business revitalization
3.1 Agreement of main creditors
The application by the Senoh Companies was made jointly with Resona Bank.
3.2 Standards for productivity improvement
Successful implementation of this business revitalization plan is expected to increase

Page 7 of 8ROE by at least two percentage points, increase the tangible fixed asset turnoverratio by at least five percentage points, and increase the value-add per employee byat least six percentage points.
3.3 Standards for financial soundness
Through implementation of this business revitalization plan, the ratio ofinterest-bearing debt to cash flow will be within ten times, and current revenues will begreater than current expenses.
4. Comparison with liquidation value
The value of Senoh Companies’ debt on liquidation is estimated to be less than the value
available through implementation of the business revitalization plan.
5. Potential to dispose within three years all debt, shares or other assets acquired by ETIC
Implementation of the business revitalization plan is expected to significantly improve thefinancial condition of the Senoh Companies, enabling the companies to achieve stable
cash flows and making refinancing possible.
6. Connection with structural oversupply
Implementation of the business revitalization plan will not increase the supply capacity of
Senoh Companies. Accordingly, the plan has been judged as ‘not hindering the resolutionof structural oversupply’ with reference to Article 19 of the Act on Special Measures for
Industrial Revitalization and Industrial Innovation.
7. Status of consultations with workforce
There are no labor unions connected with the Senoh Companies. Employee briefings on
the situation are planned.
Section 5: Responsibility of management
The responsibility of the former management team for the current predicament of the Senoh
Companies will be reflected through the resignation of all directors, without directors’
retirement benefits.
Section 6: Responsibility of shareholders
To reflect the responsibility of shareholders, the representatives of the Senoh Companies
will transfer to Senoh, without compensation, all shares held in affiliated companies.
Shareholders of Senoh, during the special liquidation process of the former company aftercompany separation, will not receive any distribution of remaining assets, and will effectively
have all their shares cancelled.
ENDS

Page 8 of 8