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The risks that may affect the business performance, share price and financial conditions of the Tokyo Dome Group include those summarized below. The Group’s business and other risks are not limited to these items, and the statements below regarding the future constitute the judgment of the Tokyo Dome Group as of the submission of its financial statements for the fiscal year ended January 2009.
1. Effects of Natural Disasters, Etc.
Many of the Tokyo Dome Group’s business foundations are concentrated in Tokyo Dome City located at Koraku, Bunkyo Ward, Tokyo. These would be subject to damages, for example, from a large earthquake in central Tokyo. While the Tokyo Dome, Tokyo Dome Hotel, LaQua and other individual facilities are earthquake-resistant, a disaster might still cause damages to these facilities and to transportation organs and lead to the cancellation of various events within Tokyo Dome City, having a negative effect on the Group’s performance from a reduction in the number of visitors. Also, the outbreak of a new flu pandemic could have a negative impact on the operating performance of the Group's business.
2. Effects of Higher Interest Rates
As of the January 31, 2009, the Tokyo Dome Group had ¥199,570 million in interest-bearing debt (total of long and short-term borrowings, commercial paper and corporate bonds). Although the amount of the Group’s interest-bearing debt greatly decreased with its withdrawal from the finance business through a business transfer during the fiscal year ended January 2007, the sum total of the Group’s interest-bearing debt is still at a high level in terms of the Group’s operating income.
While the Tokyo Dome Group is now systematically reducing its interest-bearing debt in accordance with the policy under our medium-term business plan, it will take time to improve the balance between the amount of interest-bearing debt and the ability to generate cash flow, so the high level of dependence on such debt is projected to continue for some time. The Group is working to secure the stable provision of the required funds and to reduce its exposure to interest rate fluctuation risk through risk swap contracts and other instruments, and we expect the present low interest rates to continue for the time being. Regardless, a large rise in interest rates could affect the Group’s business performance and financial conditions.
3.Regarding Legal Regulations
The district in Suidobashi where the Group’s primary businesses are located (hereafter, Tokyo Dome City) has been specified by Tokyo Prefecture as an “urban planning facility” (urban planning park) under the City Planning Law, and is subject to regulation (restrictions) regarding the types of facilities that may be constructed as well as their building footprints and greenery areas (building-to-land coverage ratios). The Tokyo Dome Group has established businesses within Tokyo Dome City, including the Blue Building, Yellow Building, Tokyo Dome, the Tokyo Dome Hotel, LaQua, and MEETS PORT (opened in March 2008). All future efforts by the Tokyo Dome Group to develop new businesses (construct new buildings, make additions to existing buildings, change the use of buildings, etc.) within Tokyo Dome City will also be subject to the applicable regulations under the City Development Law. Specifically, approximately 128,000 square meters of the total 133,000-square-meter area of Tokyo Dome City have been specified as an “urban planning facility” district under the City Development Law.
4. Regarding the Bicycle Race Business
The Tokyo Dome Group subsidiary Matsudo Kousan Co., Ltd. owns the Matsudo Bicycle Racetrack, and the Group subsidiary under the equity method Kagetsuen-Kanko Co., Ltd. owns the Kagetsuen Bicycle Racetrack. Matsudo Bicycle Racetrack has a facilities lease contract with the city of Matsudo, and Kagetsuen Bicycle Racetrack has a facilities lease contract with the Kanagawa Prefecture Bicycle Race Association. Both of these subsidiaries that own bicycle racetracks obtain most of their income from rental fees under the above-specified contracts. Many organizers of public competitions are facing harsh circumstances, and the financial conditions of sponsors may affect the Tokyo Dome Group’s business performance and financial conditions.