Kumagai jumps on bailout report

TOKYO, Japan (Reuters) -- Shares in Kumagai Gumi Co finished 11 percent higher Wednesday after a report that Sumitomo Mitsui Financial Group was putting together a 300 billion yen ($2.5 billion) bailout for the debt-ridden Japanese builder.Kumagai jumps on bailout report

An aid package would be the latest in a series of bailouts of heavily indebted builders. The practise has been criticized as an ineffective measure that delays a clear-out in the bloated construction sector.

SMFG, Japan's second-largest banking group, planned to shoulder around 250 billion yen or more of the package for Kumagai, its second-largest borrower, the Asahi Shimbun newspaper said.

The rest would be provided by other Kumagai creditors.

The package would consist mostly of a debt waiver and involve debt-for-equity swaps, the Asahi said.

The report pushed Kumagai shares up 11.11 percent, or two yen, to 20 yen by the close, while SMFG stock was up 1.33 percent at 228,000 yen. The Nikkei average rose 1.23 percent to 8340.01.

SMFG spokesman Takashi Morita said only that nothing specific had been decided. No one at Kumagai could be reached for comment.

The bailout would be the latest of a number of rescue packages for builders and real estate firms still hamstrung by mountains of debt and bad assets left over from the bursting of Japan's bubble economy over a decade ago.

The aid packages of five other firms bailed out since last March -- Daikyo Inc, Towa Real Estate Development Co Ltd , Haseko Corp, Hazama Corp and Arai-Gumi Ltd -- totalled over one trillion yen.

Kumagai, which received a massive rescue package of 450 billion yen in 2000-01, is operating under a 12-year restructuring plan and needed the first debt waiver to help it return to the black in 2001-02 after nine years of losses.

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