Mycal enters bankruptcy

By CNN's Alex Frew McMillan

TOKYO, Japan -- Struggling supermarket chain Mycal Corp. has given up on itself and started bankruptcy proceedings, it said Friday.

Mycal first declined comment on reports it was scrapping three years' efforts at restructuring to enter bankruptcy.

But it later confirmed it was seeking protection from its creditors. That ranks it among the top five corporate failures in Japan's history.

Its main lender, Dai-Ichi Kangyo Bank Ltd., plans to cut off all further support to the company, Kyodo wire agency stated. The bank had recently pledged to stand by Mycal.

Faced with a debt load of 1.05 trillion yen, the lack of support forced Mycal into bankruptcy.

Other estimates put its parent company's total debt as high as 1.5 trillion yen.

Stock plummets ahead of freeze

Its stock plummeted in response. The Tokyo stock exchange suspended trading in Mycal's shares on Friday afternoon. They were down the maximum 15 yen they could fall, off 22 percent at 53 yen.

Mycal is Japan's fourth-biggest retailer. Its bankruptcy invokes memories of the failure of the Sogo department store chain.

Sogo had the largest bankruptcy in Japanese history, when the business failed in July 2000 under debts of about $15.5 billion (1.87 trillion yen).

Mycal's failure has been expected for some time. But the timing came as a bit of a shock.

Dai-Ichi may have been pressured by falling stock prices or by Mizuho bank. Dai-Ichi is part of Mizuho Holdings, the biggest bank group in the world by assets.

Japan's stock market tanked after the attacks in the United States. That has put huge pressure on Japan's banks, which have large stock holdings.

A J.P. Morgan research report said Mycal's failure may prompt the central Bank of Japan to do more to help Japan's economy.

The sluggish state of the world's second-biggest economy has meant long-term problems for retailers like Sogo and Mycal.

The prospect that Japan was getting serious in dealing with its bad loan problem boosted Japanese stocks 4.1 percent on Friday. That helped the Nikkei above 10,000, closing at 10,008.89.

Mizuho rose as much as it could in a day, 25,000 yen, or 5.07 percent, to close at 518,000 yen.