Anabuki, based on the southern Japanese island of Shikoku, announced in February that it had hired Nikko Cordial Securities to find an investor to buy the company and help it rebuild its operations.
The bidders are willing to pay more than ¥20 billion (RM734 million) in equity and debt to buy Anabuki but the deal size could reach ¥100 billion if Anabuki, as is being discussed, significantly cuts its debt, one of the sources said.
The second round of bidding closed on May 14, both sources said and the winner is expected to be chosen by the end of this month.
Both sources spoke on condition of anonymity because the bidding process is not public. Anabuki declined to comment.
Anabuki, hit hard by the slump in Japan's property market, filed for bankruptcy in November with ¥139 billion in liabilities, making it the country's sixth-largest corporate failure last year, according to Tokyo Shoko Research.
But the auction is taking place as some analysts are becoming more positive on the outlook for the country's condominium market.
The number of new apartments put up for sale in the Tokyo area jumped 54% in March from a year earlier, rising to a 38-month high, according to the Real Estate Economic Institute.
"This trend in the Tokyo area will eventually spread outside Tokyo because there is a fundamental demand for the purchase of good condominiums," said Takeshi Ide, chief analyst at Tokyo Kantei, a private real estate think tank.
CarVal Investors, an investment firm set up by agribusiness giant Cargill Inc, is also among the bidders, the sources said.
Japanese apartment developer Daikyo Inc has launched a joint bid with investment fund J-Will Partners Co, one of the sources said.
Nikko Cordial, TPG and Advantage Partners all declined to comment. CarVal could not be reached for comment, while Daikyo said it could not immediately comment.
Anabuki ranked as Japan's third-largest condominium developer in 2007 behind Daikyo and industry leader Mitsui Fudosan, according to the Real Estate Economic Institute, a research firm. -- Reuters