Metal One Metal One Coporation
January 30, 2003
"Metal One Corporation," a new company established by Mitsubishi Corporation and Nissho Iwai Corporation, integrating their iron and steel product business, and the Development Bank of Japan/Bank of Tokyo-Mitsubishi/Mizuho Corporate Bank/UFJ Bank, etc. entered into stand-alone financing agreements of approx. ¥190 billion.

Metal One Corporation (Chairman and CEO: Norio Okada; Head Office: Minato-ku, Tokyo (the "Company")), for its financing, entered into a long-term loan agreement with the Development Bank of Japan as the lender, and a revolving credit facility agreement in a syndicated arrangement with The Bank of Tokyo-Mitsubishi, Ltd. as the primary arranger and Mizuho Corporate Bank, Ltd. and UFJ Bank Limited as joint arrangers.
The Company was established on January 6, 2003 as a new consolidated company integrating the iron and steel product business divisions of Mitsubishi Corporation and Nissho Iwai Corporation. As for its business development, the Company will continue to make effective use of the general trading companiesEnetworks held by its parent companies, Mitsubishi Corporation and Nissho Iwai Corporation, for financing. Standing alone from its parent companies, however, it has concluded its agreements, consisting of a medium-term facility agreement for a total of ¥140 billion with The Bank of Tokyo-Mitsubishi, Mizuho Corporate Bank and UFJ Bank as arrangers, and a long-term loan agreement for less than ¥50 billion with the Development Bank of Japan. These agreements were achieved as a result of efforts aimed at having a financing based on its own managerial capability, creditworthiness and financial base.

The current financing arrangement has not only a condition that the two parent companies do not offer any guarantee but also an advanced financing formula different from any form of loan in the past, as described below.

1. Stand-alone Financing Dependent on the Cash Flow
  These agreements are not like those loans with real estate or securities as collateral, but those of stand-alone financing dependent on the cash flow of the Company. In these agreements, restrictive financial covenants are established to obligate the company to maintain certain levels of financial indicators such as EBITDA and interest coverage ratio, and to observe some restrictions in respect of the indicators. In addition, the Company is obligated to submit reports on the management results. After the lenders examined comprehensively the business prospects of the Company in such ways as reviewing materials relating to its parent companies before the establishment of the Company, its business structure and business environment, they made a judgment that the Company can secure a satisfactory cash flow in the future, which resulted in offering conditions for financing favorable to the Company.
2. Assessment of the Accounts Receivable Management Method
  Since the Company plays a pivotal role in the steel distribution of the Mitsubishi Corporation and Nissho Iwai Corporation group, its assets consist mainly of current assets such as accounts receivable and stocks. As fixed assets are for promoting effective turnover of these current assets, improvement in the quality of the current assets is important for raising the corporate value of the Company. Consequently, the Company manages accounts receivable based on the strict formulas of the Mitsubishi Corporation when examining enterprises. In the current agreements, conditions for financing favorable to the Company have been secured as a result of lendersEassessment of the accounts receivable management method concerned as well as the creditworthiness, dispersion and so forth of its buyers.
3. Linkage of Two Agreements Through Common Provisions for Financial Restrictions
  Although the medium-term facility agreement and long-term loan agreement are independent of each other, both agreements have common provisions for financial restrictions, not to mention the establishment of cross default provisions, in order to realize virtual joint financing. Therefore, responsibilities of lenders to the Company are clearly stated for each bank, making it impossible to force burdens on specific financial institutions during a period of unsatisfactory performance of the Company. From the viewpoint of the Company, while it is raising fund through two independent agreements, the stability and liquidity of the funds over the medium and long terms are secured on the basis of the spirit of a joint financing, allowing the Company to take a rational financial strategy.
4. Medium-term Facility Based on the Commitment
  The medium-term facility is to set the line of financing in the form of revolving credit (to allow repeated borrowing) in consideration of the convenience at the time of each borrowing. In addition, it is arranged in a formula of setting the line for the specific financing (so-called commitment line) under which the financial institution that will be a lender assumes a legal obligation in executing the loan. While, for this kind of commitment line, an agreement is generally made for the commitment (covenant for lending) for a short period like 364 days, in this case the commitment for relatively long periods such as three and five years has been obtained from financial institutions. Consequently, the system contributes to the construction of a more stable financing structure for the Company.

The Company is determined to make further efforts to take due responsibility for the future development of the steel distribution industry, making effective use of the favorable conditions for the borrowing obtained in this way.
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