Japanese pub operator Watami secures $ 90 million in first state aid test
TOKYO – Watami, one of Japan’s largest restaurateurs, is expected to receive around 10 billion yen ($ 92.5 million) in funding from the Development Bank of Japan as the company seeks to change its business model and adapt to the new normal, Nikkei has learned.
The state-backed DBJ last month launched a program to support large companies with at least 1 billion yen in capital in the restaurant and hospitality industries ravaged by the coronavirus. Watami is the first known borrower of the new program.
Subordinated loans and other types of financing for Watami, expected as early as mid-May, come as Tokyo, Osaka and other regions prepare to go under another state of emergency from Sunday to May 11 to fight a surge in COVID-19 cases.
Coronavirus restrictions have dealt a severe blow to Watami’s chains izakaya pubs, which before the pandemic were popular after-work dining spots. For the January-March quarter, comparable store sales for its domestic foodservice business fell by half from a year earlier. The company is expected to report a net loss of 11.6 billion yen for the year ended March.
To increase sales outside the izakaya business, on which it was founded, Watami is transforming around 120 of its 330 pubs under several brands such as Torimero and Miraizaka – whose menus feature chicken dishes – into yakiniku grilled beef restaurants. The company’s makeover plans also call for an increase in fried chicken restaurant openings.
Watami issued new shares in March to raise around 1 billion yen in new capital. He is now buying more funds through subordinated loans and preferred stocks. Subordinated loans are generally seen as part of capital in banking controls and thus help to consolidate the financial position of borrowers, which increases the likelihood that they will receive ordinary loans.
Until now, the Bank’s support has consisted mainly of unsecured and interest-free loans to finance day-to-day operations. As restaurants and accommodation businesses continue to suffer heavy losses amid the protracted pandemic, DBJ is now providing capital type loans.
Under the new program, subordinated loans will carry an interest rate of 1% for the first three years, and then 3% thereafter.