Nova eyes new share issuance to dispel market concerns after gov't terminates subsidies

Nova Corp, the embattled English-language school operator, is considering issuing new shares to strengthen its capital and dispel market concerns that its business could worsen in the wake of a government order to suspend part of its operations, President Nozomu Sahashi said Friday.

Although the details are yet to be worked out, Nova thinks tapping external capital is a "measure toward a next step," Sahashi said after a business suspension order was imposed by the Ministry of Economy, Trade and Industry.

Meanwhile, the Ministry of Health, Labor and Welfare The welfare ministry said Friday that Nova's English language courses will no longer qualify for government subsidies designed to support educational opportunities as the company has been found to have lied to consumers when soliciting students.

The government provides subsidies for those engaged in educational training authorized by the welfare ministry to improve the abilities of the unemployed and other people.

In 1999, Nova's 32 courses were approved for the subsidies program by the welfare ministry. In fiscal 2006, about 4,700 people received a total of 560 million yen in subsidies under the program. Since 1999, around 71,000 Nova students have received a total of about 16.1 billion yen in such subsidies.

Sahashi said Nova will have a tough time in the first half of the current business year, but that it will see some improvement in the second half. "It is possible that we could return to profitability."

The company booked a net loss of 2.50 billion yen for the year through March 31.

Following the order by METI on Wednesday, Nova suspended part of its business Thursday for six months.

The ministry said many Nova students were unable to take lessons at a school or time of their choosing despite the fact that Nova solicited new students by telling potential customers that they could book language lessons "anytime and anywhere."

The Nova management "must take responsibility," Sahashi said, indicating the company will impose disciplinary measures on its executives, including himself, in the future.

The president also said Nova will strive to solve the problems by setting up an internal inquiry panel.

Nova, Japan's biggest English-language school headquartered in Osaka with a total of about 480,000 students, violated a law designed to protect consumers in fields such as education, beauty services and arranged marriages, METI said.