Toa Steel has a debt of 260 billion yen ($ 1.9 billion), leading credit research firm Teikoku Data Bank estimated. ``We heard of news reports that our company was considering liquidation, and we are actually proceeding with things in that direction,'' a Toa spokesman told AFP.

``We will hold a board meeting tomorrow to make our final decision.'' Most of Toa's assets and staff would be taken over by NKK in February, when the larger firm raised its stake in Toa to 51.6 percent.

NKK would post an extraordinary loss of more than 50 billion yen this year on the collapse of Toa, Nikkei News said. NKK is expected to announce its profit forecast revision tomorrow.

Japan's largest post-war manufacturing failure so far came earlier this month, when copy machine maker Mita Industrial Co Ltd filed for court protectionwith 205.6 billion yen in debt.

Toa Steel, founded in 1950, has some 1,400 staff and four plants in Japan.