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Pacific Holdings files for bankruptcy

The debt-ladened operator of two J-REITS has filed for bankruptcy and will delist from the Tokyo Stock Exchange after failing to raise ¥47 billion in capital.

Pacific Holdings, the operator of two Japanese real estate investment trusts, has filed for bankruptcy protection after collapsing under ¥163.6 billion (€1.3 billion; $1.7 billion) in debt, according to multiple press reports.

The Tokyo Stock Exchange will delist its shares on 11 April.

The failure is the third largest of 2009 following apartment developer Japan General Estate Company and lender SFCG Company.

Pacific Holdings tried to stay afloat by raising ¥47 billion from a group of Chinese investors. However, Japanese ratings agency Rating and Investment Information downgraded Pacific Holdings to CCC – eight levels below investment grade – in January, with auditors last month refusing to certify the company’s earnings statement. The auditors refused to sign off on the earnings statement because it relied on the potential Chinese investment.

The latest potential financing is not the first to fall through. Last summer, the second largest securities brokerage in Japan, Daiwa Securities Group, considered buying more than 50 percent of Pacific Holdings.

Failed J-REITs have emerged as investment targets of late. J-REIT New City Residence Investment Corp filed for bankruptcy last October making it the first to fold. It is currently up for auction valued at roughly ¥100 billion. Goldman Sachs, state-owned Development Bank of Japan and Daiwa as well as US private equity firms Oaktree Capital Management and Lone Star Funds are reportedly in the final round of bidding for New City.