TSE head recommends court-led Tepco restructuring, stock dives

TOKYO (Reuters) - Tokyo Electric Power Co <9501.T> should go through a court-led rehabilitation similar to Japan Airlines, the head of the Tokyo bourse was quoted as saying, sending the utility's stock tumbling on the possibility of a delisting.

Japanese authorities have consistently said that Tepco, the operator of the quake-hit Fukushima Daiichi nuclear plant, should remain both solvent and listed, and have proposed a fund be set up with taxpayer money to compensate victims of the nuclear crisis.

However, Tokyo Stock Exchange head Atsushi Saito, who used to head a state-backed turnaround body, said temporary nationalization for the troubled utility should be considered and that creditors would likely have to forgive loans.

"It would be good if Tepco could be handled in the same way as JAL," Saito was quoted as saying in an interview with Asahi Judiciary, an online magazine owned by the Asahi newspaper.

After filing for bankruptcy last year, Japan Airlines was delisted and has since completed a court-led restructuring.

"His comments could change the tide... there was some criticism over politicians' moves to save the utility firm and keep it listed but until now that criticism has not had much of an impact," said Fujio Ando, an advisor at Chibagin Asset Management.

Tepco's stock dived 24 percent to 218 yen, falling at one point by its daily limit to a lifetime low of 206 yen. Stocks in banks, big lenders and holders of its shares, also fell on his comments.

The spread on Tepco's five-year credit default swaps, the cost of insuring its five-year debt was expected to widen, after spiking to a record 950 basis points when they were last traded on Friday.

CLEAR RULES NEEDED

Saito said the government should adopt a clear set of rules to handle the utility just as it did with troubled banks during Japan's financial crisis in late 1990s.

"For Tepco too, the government should make a special law. It should do a thorough investigation of its assets and if its liabilities exceed its assets then it should be nationalized temporarily and its assets should be reorganized," he said.

"Banks and other creditors should be asked to forgive loans to a certain degree. During this process, the sale of grids and nationalization of nuclear plants might be considered," he said.

"If the company gets delisted as a result, then that just has to be accepted. It can relist as a good power generating company some years later."

The Tokyo bourse said has no authority to delist Tepco as long as its financial statements are in order and that Saito was just expressing his personal opinion.

Tepco is still struggling to bring its Fukushima Daiichi nuclear plant under control nearly three months after it was crippled by a massive earthquake and tsunami, and much uncertainty hangs over the proposed compensation scheme.

Fukushima Daiichi's reactor cooling systems were knocked out by the March 11 disaster, causing a fuel meltdown at three of the reactors and forcing the evacuation of about 80,000 residents near the plant.

Kyodo news agency reported on Sunday that the company was expected to post a parent-only net loss of 570 billion yen ($7 billion) for the year to next March 31, excluding compensation costs.

(Additional reporting by Mariko Katsumura, Antoni Slodkowski and Ayai Tomisawa; Editing by Edwina Gibbs and Lincoln Feast)