A group of banks has hit the brakes on a refinancing request by scandal-hit Bigmotor Co. for 9 billion yen ($61 million) due for repayment this week, sources said.

The major used-car dealer and repair chain’s future looks uncertain as used-car sales have significantly dipped and casualty insurance companies and credit companies are suspending their relationships with it.

Sumitomo Mitsui Banking Corp., MUFG Bank Ltd., Mizuho Bank Ltd. and Hiroshima Bank Ltd., which have deals with Bigmotor, jointly held a meeting with the company in Tokyo on Aug. 10.

They discussed 9 billion yen due for repayment this week and other topics.

While Bigmotor requested a loan, the banks said after the meeting that they will not respond to the request.

The company withdrew its request and intends to repay within the deadline.

A senior official from one of the banks said, “We are not yet convinced about their sincere reflection on its past actions and the reconstruction plan based on that reflection.”

Bigmotor’s reputation cratered in July after a report was released accusing workers of intentionally damaging automobiles brought in for accident repairs and unnecessarily replacing parts and passing the inflated costs to insurance companies. 

At a news conference on July 25, which was the first held after the scandal came to light, Bigmotor revealed that the number of used cars the company bought or sold had both halved compared to usual times.

In the meeting with the banks, the company reported the figures dropped even further by 60 percent from usual times, according to the sources.

An employee of a Bigmotor store in western Japan said, “The number of customers is decreasing astonishingly.”

Such a deteriorating business performance is believed to have made the banks more wary about granting a loan.

Bigmotor’s sales for the fiscal year ending in September 2022 were about 590 billion yen, according to Teikoku Databank Ltd.

The company has interest-bearing debts of about 60 billion yen as of the end of the same month.

But it has solid circulating assets, including cash and deposits of around 32 billion yen, as well as large inventories of cars.

“The company has cash reserves, so the situation will not drastically worsen in the near future,” said a senior official from one of the banks.

The focus is whether Bigmotor can present a reconstruction plan that convinces the banks.

MORE COMPANIES ENDING TIES

Major credit company Jaccs Co. suspended accepting new auto loan applications from customers purchasing used cars at Bigmotor on Aug. 7 in the wake of the highly publicized scandals.

Jaccs is believed to have held a significant share of the loans taken out by Bigmotor consumers, so the suspension could affect the used-car dealer’s sales.

Recruit Co., which operates the used-car information site Carsensor, discontinued listing of used vehicles offered by Bigmotor from Aug. 9.

It was listing information on about 22,000 cars from 265 Bigmotor stores nationwide as of July 21.

Used-car information site Goo-net also halted listing vehicles handled by Bigmotor, suggesting a major blow to sales.

Three major insurance companies--Sompo Japan Insurance Inc., Tokio Marine and Nichido Fire Insurance Co. and Mitsui Sumitomo Insurance Co.--have stopped recommending Bigmotor as a repair shop to car owners in the event of an accident since last year.

The focus is also on whether authorities will impose penalties on Bigmotor.

The transport ministry conducted on-site inspections at 34 maintenance facilities nationwide in July.

If malicious wrongdoings are uncovered, the ministry could revoke the designation of private vehicle inspection facilities and the certification of the company’s factories. That could force Bigmotor to downsize its maintenance operations.

The Financial Services Agency also ordered Bigmotor to report on its dealings based on the Insurance Business Law at the end of July.

If malicious insurance claims are found, authorities could revoke the company’s registration as an insurance agency.

Shinji Izumi, president of Bigmotor, said at a news conference in July, “We will thoroughly strengthen governance to ensure that all employees are doing their jobs in the correct manner.”

However, if the company fails to quickly restore trust, it will find its business environment becoming more difficult.

(This article was written by Kentaro Uechi and Hiroaki Kimura.)