Tokyo Century : Notice Concerning Recording of Extraordinary Loss and Revision of Consolidated Results

January 10, 2023

Notice Concerning Recording of Extraordinary Loss and Revision of Consolidated Results

Forecast for the Fiscal Year Ending March 31, 2023

Tokyo Century Corporation (the "Company") plans to record an extraordinary loss in the financial statements for the third quarter of the fiscal year ending March 31, 2023, due to deterioration in the prospect of recovery of receivables related to a financing and loan guarantee made by its consolidated subsidiary Aviation Capital Group LLC ("ACG"), headquartered in California, USA, to a Russian airline. In response to this matter, the Company has decided to revise its full-year consolidated results forecast for the fiscal year ending March 31, 2023 (April 1, 2022 through March 31, 2023), which was announced on May 12, 2022.

1. Background of extraordinary loss

As of March 31, 2022, ACG had exposure to Russian airlines of approximately $600 million (total of eight owned aircraft: approx. $380 million, financing and loan guarantee: approx. $220 million). For those eight leased aircraft (approx. $380 million), due to the low likelihood of aircraft return, etc., it has become difficult to estimate future cash flows. Therefore, the Company has recorded the entire book value of approximately ¥44.4 billion (approx. $380 million; *1: converted at ¥116.34 to the dollar) as an extraordinary loss (impairment loss) for the first quarter of the fiscal year ending March 31, 2023 of the Company. One of the leased aircraft was returned in October 2022 because the aircraft type had not yet been approved for operation by the Russian authorities.

On the other hand, we had determined that we would be able to recover approximately $220 million in financing and loan guarantee as of March 31, 2022, after transferring the collateralized aircraft out of Russia and restructuring the financing structure. However, due in part to the prolonged conflict between Russia and Ukraine, the procedure for transferring the aircraft out of Russia has been delayed since then, and no progress has been seen in the approval procedure on the Russian side. In light of this situation, we have determined that there is no prospect for recovery of approximately $220 million in financing and loan guarantee. As a result, the entire amount will be treated as a provision and recorded as an extraordinary loss in the financial results for the third quarter of the fiscal year ending March 31, 2023 of the Company

(approx. ￥28.3 billion *1 converted at ￥128.30 to the dollar).

*1 ACG's fiscal year ends on December 31 and is different from the consolidated fiscal year-end (March 31). However as the difference does not exceed three months, the Company uses ACG's financial results as the basis for its consolidated financial results. Therefore, for the first quarter of the Company's fiscal year ending March 31, 2023, the average exchange rate for the period from January to March 2022 (¥116.34 to the dollar) was applied; for the third quarter of the Company's fiscal year ending March 31, 2023, the average exchange rate for the period from January to September 2022 (¥128.30 to the dollar) was applied.

2. Overview of the Counterparty

We will refrain from disclosing the name of the counterparty, etc., because the counterparty (one Russian- registered airline company) has not yet entered into legal liquidation.

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3．Type and amount of receivables

Type of receivables			Amount	Percentage of
	US dollars	Yen conversion (*2)	consolidated net assets
Financing	95	million dollars	13.7 billion yen	1.7%
Loan guarantees	122	million	dollars	17.7 billion yen	2.2%
Total	217	million	dollars	31.4 billion yen	3.9%

*2 The amount is converted at the exchange rate of ¥144.81 as of September 30, 2022, which is the end of ACG's third quarter that corresponds to the same of the Company's fiscal year ending March 31, 2023.

4．Revision of full-year consolidated results forecast for the fiscal year ending March 31, 2023 (April 1, 2022 through March 31, 2023)

		Net income	Basic earnings per
	Ordinary income	attributable to
	share
		owners of parent
Previously announced forecast (A)	Millions of yen	Millions of yen	Yen
（Fiscal year ended March 31, 2023）	100,000	20,000	163.66
Revised forecast (B)	100,000	1,000	8.18
Change (B-A)	-	-19,000	-155.48
Change (%)	-	-95.0%
(Reference) Actual results for the previous fiscal year (Ended	90,519	50,290	411.56
March 2022）

(Reason for revision)

The Company has revised its forecast of net income attributable to owners of parent and basic earnings per share for the fiscal year ending March 31, 2023, as net income attributable to owners of parent will decrease by approximately ¥19 billion due to the recording of an extraordinary loss of approximately ¥29 billion (financing and loan guarantee: approx. $220 million; *3: ¥131.63 to the dollar).

The year-end dividend forecast remains unchanged.

*3 Average exchange rate for the period January-December 2022

5. Future outlook

ACG has insurance coverage over the entire exposure to Russian airlines and has already made claims against the insurance companies under the insurance. ACG will now commence legal proceedings to seek payment of the insurance claims.

However, since it is difficult to predict the possibility and the timing of recovery of the insurance claims at this time, the amount of insurance claims made is not included in the full-year consolidated results forecast for the Company's fiscal year ending March 31, 2023.

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Contact Information: Tokyo Century Corporation Investor Relations Division Keisuke Yamashita

Inquiry:https://www.tokyocentury.co.jp/en/contact/form.php

Phone: [phone]

(Notes)

1. The forward-looking statements, including the results forecast, contained in this document are prepared based on information available as of the date of this release, and actual results may differ from these forecasts due to various factors.
2. This translation is prepared and provided for reference only. In the event of any discrepancy between this translated document and the original Japanese document, the original document shall prevail.
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