AIFUL CORPORATION

Category: Credit Event Factual Background: On August 25, 2009, AIFUL Corporation (“Aiful”), the Reference Entity, filed application for the business revitalization proceeding (the “Business Revitalization ADR”) in accordance with Act on Promotion of Use of Alternative Dispute Resolution (Act No. 151 of 2004; the “ADR Act”) and Act on Special Measures concerning Industrial Revitalization (Act No. 131 of 1999) with the Japanese Association of Turnaround Professionals (“JATP”), a private institution licensed by the Ministry of Justice (the “MOJ”) of Japan as dispute resolution business operator. Following Aiful’s filing for the Business Revitalization ADR, the examiners were appointed by JATP for examining the application and then they reviewed it from the perspective of whether the Business Revitalization ADR suited the restructuring plan for Aiful. In general, if the examiners confirm that the Business Revitalization ADR suits the restructuring plan for the filing company after conducting hearings and other types of review on the case, they will provisionally accept the application on the condition of payment by the applicant of service fees and thereafter appoint an Executor candidate out of registered attorneys having expertise in turnaround business, who is to supervise the proceeding after it formally commences. On September 18, 2009, Aiful published that the application for the Business Revitalization ADR had been provisionally accepted by JATP (see http://www.ir-aiful.com/data/current/newsobj-1618-datafile.pdf), meaning that the examiners had confirmed that the Business Revitalization ADR would be suitable for Aiful’s efforts to turn around its business in consideration of the outcome of the review. On the same day The Sumitomo Trust and Banking Corporation, Ltd. (“STB”), one of the main financing banks of Aiful, also published that the bank was in a position to “consider necessary cooperation constructively after examining Aiful’s business turnaround plan,” provided that the application for the proceeding would be formally accepted (see http://www.sumitomotrust.co.jp/IR/company/en/pdf/nr2009/E090918.pdf). On September 24, 2009, Aiful’s application for the Business Revitalization ADR was formally accepted and the proceeding commenced, followed by the appointment of the Executor. Following the formal acceptance by JATP of Aiful’s application for the Business Revitalization ADR, Aiful published the summary of proposed business revitalization plan (see http://www.ir-aiful.com/data/current/newsobj-1625-datafile.pdf) and Aiful and JATP, in their joint name, sent to all creditors who were to be subjected to the proceeding a written request for their consent to suspension of payment and forbearance from enforcing security interests. In accordance with the regular practice of the proceeding, we have been consulted by Aiful regularly since before the filing, and we were informed by Aiful that it would be becoming generally unable to pay its debts as they become due in September 2009 or later due to shortfall of fund in hand, unless it suspends scheduled payments to a substantial number of lenders. Aiful also admitted such distressed financial condition of itself by publishing in its timely disclosure documents as of September 18 and 24, which constituted part of the filing, that “it is becoming more difficult to raise sufficient funds to maintain our current asset size.” On September 30, 2009, Aiful in fact suspended scheduled payments of loan principal to all of its lenders in accordance with the written request, dated as of September 24, 2009, demanding their consent to suspension of payment and forbearance from enforcing security interests. Question: Has a Bankruptcy Credit Event occurred with respect of Aiful on or around September 18, 2009 Tokyo time pursuant to Section 4.2(b) and/or Section 4.2(h) for either of the following reasons?: (i) it is deemed that Aiful admitted, in the midst of the communication with us, which was conducted in connection with, and as necessary preparation for, the filing for the Business Revitalization ADR as “judicial, regulatory or administrative proceeding,” that it had been in so distressed condition that it would be running short of fund in hand constantly in September, 2009 or later, unless it was allowed to suspend scheduled payments on September 30, 2009 and have the proposed business revitalization plan approved by all creditors to be subjected to the proceeding, meaning that Aiful will be becoming generally unable to pay its debts as they become due in September 2009 or later unless it suspends scheduled payments to a substantial number of lenders and we received such information directly from Aiful (Aiful also admitted such distressed financial condition by publishing in its timely disclosure documents as of September 18 and 24, which constituted part of the filing, that “it is becoming more difficult to raise sufficient funds to maintain our current asset size”); and (ii) if the Business Revitalization ADR is not construed to fall under the “judicial, regulatory or administrative proceeding” as set forth in Section 4.2(b), the proceeding pursues the same purpose of restructuring debts and businesses of distressed companies as the “judicial, regulatory or administrative proceeding” under the supervision of a government-licensed Executor and the admission in writing by Aiful of its inability generally to pay its debts as they become due in the midst of such proceeding is no less serious and indisputable than that made in a “judicial, regulatory or administrative” proceeding, having an analogous effect to an admission made in a “judicial, regulatory or administrative proceeding.” We will also send the relevant documents via E-mail.