Mazda falls after report of capital increase

Mazda Motor Corp., the most unprofitable among Japan’s eight biggest carmakers, fell the most in almost a year in Tokyo trading after NHK Television reported the company is preparing for a sale to raise capital by as much 100 billion yen ($1.25 billion).

Mazda dropped as much as 12 percent, the biggest drop since March 2011, to 141 yen as of 12:45 p.m. in Tokyo, reversing gains of as much as 2.5 percent earlier today.

The carmaker, bracing for a 100 billion yen loss, also plans to borrow about 70 billion yen via a subordinated loan from banks including Sumitomo Mitsui Financial Group Inc. and the Development Bank of Japan, NHK reported, without citing anyone. Mazda said in a filing that no decision has been made.

Losses reduced the company’s equity to 19.2 percent of assets during the fiscal third quarter, down 5 percentage points from the end of the previous fiscal year. The drop in the so- called equity ratio triggered Japan’s Rating & Investment Information Inc. to warn it may lower its debt rating on Mazda within three months, raising the risk borrowing costs will rise.

Mazda President Takashi Yamanouchi told reporters in Tokyo this month that repairing Mazda’s capital “is a must” and that the company was weighing its options to boost capital.