Japan may halve time for rights issues: sources

By Noriyuki Hirata

TOKYO (BestGrowthStock) – Japan may halve the procedure time for companies to raise funds through rights issues to make it easier for corporations to raise capital from existing shareholders, sources familiar with the matter said on Wednesday.

Rights issues, in which all existing shareholders are given an option to buy newly issued shares, have rarely been used in Japan because it can take as long as three months to process applications.

The government is considering making changes to laws and rules governing rights issue to shorten fund-raising to about a month and half, said two sources who declined to be identified because they were not authorized to talk about the matter publicly.

The new faster procedure may be available to companies in the next two years, they said.

Compared with public offerings, corporations, which have been urging a review of existing rules since the global credit crunch in 2008, may favor fast-tracked rights issues because they result in less dilution for existing shareholders, who are given an option either to buy new shares or to sell the rights to others.

“If we can’t use in Japan what is easily available abroad, it might be huge loss of opportunity. We are hoping for a rule change,” the chief financial officer of Japanese company said on condition he was not identified.

Of 107 companies which have raised 5.2 trillion yen ($62 billion) in Japan this year, only one of them, Takara Leben (8897.T: ), opted for a rights issue to garner 5 billion yen in cash.

Japan’s Financial Services Agency made changes in the law earlier this year to quicken the process, but “it should be much shorter if they want to make rights issues a viable option,” a source at a securities brokerage said.

Those changes, which would require lawmakers’ approval, may include allowing issuers to put their prospectus and notice of allocation online instead of mailing them to every shareholder, which for major companies could amount to hundreds of thousands of packages.

($1=83.73 Yen)

(Reporting by Noriyuki Hirata, Writing by Taiga Uranaka and Tim Kelly; Editing by Michael Watson)

Japan may halve time for rights issues: sources