SBI Capital Solutions is engaged in investment businesses including mezzanine investments and enterprise restructuring finance.
Mezzanine investments generally refer to investments in subordinated loans as a hybrid of debt and equity financing, or preference stocks. However, we defined it as "middle-risk middle-return investments positioned between conventional loans from banks and major nonbanks and funding through stocks", and primarily engage in investments in debtor-in-possession (DIP) loans for enterprises taking legal bankruptcy measures either under voluntary liquidation or under the Civil Rehabilitation Law, the infusion of new capital for enterprises that face difficult conditions trying to restructure through voluntary measures, and debt factoring for enterprises that have good restructuring potential.

DIP finance refers to financing for enterprises taking legal bankruptcy measures either under voluntary liquidation, or under the Civil Rehabilitation Law, or the Corporate Reorganization Law. This financing method requires a wide range of expertise, from the designing of a restructuring scheme to measures to cope with difficulties when the restructuring process does not go well. Skills to make a proposal and negotiate with various related parties including corporate managers, lawyers and accountants are required.

The sum total of DIP financing deals that are publicly announced amounts to 116.5 billion yen (total of 64 deals) after 2001. Including undisclosed deals, the number of DIP financing deals is expected to reach 100.

Although M&A is becoming common, there are only a few mezzanine funds other than the SBI Group's funds such as the Urban Renewal Private Fund, which was jointly established by Development Bank of Japan Inc. and Nomura Securities Co., Ltd., and subsidiaries of GCA Savvian CORP., a self-funding M&A adviser. Therefore, the mezzanine investment market is expected to expand as in Europe and the U.S. The SBI Group will utilize mezzanine investments as investment opportunities regardless of areas and industries, when needs and future growth of investee companies are expected.

In the mezzanine investments, a principal protection scheme is formulated for each deal so the risk of losing the original principal of the investments may be significantly decreased.

Mezzanine funds generate stable cash flow in comparison with equity investments as they have annual profit sources such as capital gain, income gain and commission income. SBI Capital Solutions aims to quickly realize capital results as DIP finance and investments and loans for near bankrupt firms are executed in the short term (around one year).

SBI Capital Solutions targets higher rate of return compared to normal bank loans and real estate investments.

Investment decisions are made quickly, in several days or weeks, which we believe meets investee companies' needs.

Investment targets of funds include enterprises being restructured that are positioned to support the regional economy. We believe our investments have contributed to the revitalization of regional economies as SBI Capital Solutions provide new capital while cooperatively designing restructuring plans. We are proud that we work as a bridge to normal economic activities as they restore original relationships with financial institutions after the restructuring stage.