Aug. 21 (Bloomberg) -- Merrill Lynch & Co. and other overseas financial firms may bid to acquire failed Japanese real-estate developer Urban Corp. to obtain its $4.4 billion of assets, two officials involved in the talks said.

As many as 10 potential investors, including Merrill, U.S. and European funds and Japanese real-estate developers, have asked Urban to be included in the bidding process for the company, according to the officials, who declined to be identified as the information isn't public.

Urban filed for protection from creditors on Aug. 13 with debt of 255.8 billion yen ($2.3 billion), making it the largest bankruptcy among listed companies in Japan this year. Urban still owns more than 477 billion yen of assets at the group level as of June 30, including properties throughout Japan and deposits and loans, according to a statement to the Tokyo Stock Exchange.

``There is a good chance for an acquirer to recoup its investment by obtaining the real-estate portfolio, as the equity is likely to be cheap,'' said Daisuke Seki, chief executive officer of Tokyo-based IB Research and Consulting Inc. ``It will be a large-sized transaction, and it will be interesting to see how overseas investors evaluate Japanese properties.''

Urban fell to 3 yen in Tokyo trading today, from 1,824 yen a year ago. The company plans to delist the shares from the Tokyo Stock Exchange on Sept. 14.

Urban spokesman Nobuaki Terashiki declined to comment on possible bidders. Merrill's Tokyo-based spokesman Tsukasa Noda also declined to comment.

Bankruptcies Rise

The Tokyo District Court started Urban's restructuring process on Aug. 18 and will select a buyer by November, Urban said in a statement this week. The Hiroshima, western Japan- based company today named Deutsche Bank AG's Japanese unit as the financial adviser for the bidding process.

Real-estate companies in Japan are facing difficulty in procuring funds to buy new properties and refinance existing ones as banks curtail lending.

The number of bankruptcies among property companies more than doubled to 60 in July from 27 a year earlier, researcher Tokyo Shoko Research Ltd. said. Lending to Japan's real-estate industry declined for a fourth straight quarter in the three months ended June, according to the Bank of Japan.

Zephyr Co., a Tokyo-based builder of condominiums, filed for protection from creditors with debt of 94.9 billion yen on July 18. Tada Corp., a construction company, filed for bankruptcy on July 31.

Urban Posts Loss

Urban on Aug. 13 reported a net loss of 45.4 billion yen for the first quarter ended June 30, compared with profit of 15.9 billion yen a year earlier, as sales dropped 43 percent to 49.9 billion yen. The company, established in 1990, has recorded annual profits since at least 1996, according to data compiled by Bloomberg.

Merrill said in January 2007 it may invest as much as 500 billion yen in a venture with SBI Holdings Inc. to buy properties in Japan and overseas.

The Wall Street firm advised Richard Li, son of Chinese billionaire Li Ka-shing, in selling the office space of the Pacific Century Place development in Tokyo for $1.7 billion in 2006. Merrill also provided $330 million in loans to K.K. DaVinci Advisors, which runs private real-estate funds in Japan.

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

Last Updated: August 21, 2008 04:48 EDT