Sharp Corp is likely to seek fresh bank loans to help it repay a $2.1
billion convertible bond due in September, with no further equity deals
likely after Samsung Electronics Co agreed to buy a 3 percent stake in
the company for $111 million, three sources familiar with the matter
"With Samsung, the tie-ups in panels are over. I doubt there
will be any more," an executive at Sharp told Reuters on condition that
he not be identified, due to the sensitivity of the matter.
The Samsung deal followed an agreement in December for Qualcomm Inc to invest as much as $120 million.
potential sale of overseas TV assembly plants in Mexico and China could
add more to Sharp's available cash but talks for Taiwan's Hon Hai
Precision Industry Co Ltd to buy a stake in the company have stalled
with a March 26 deadline fast approaching.
Sharp, which in
November said it may not be able to survive on its own, is in talks to
offload its Chinese TV assembly plant to Lenovo Group Ltd and to sell its
Mexico factory to Hon Hai, according to sources familiar with the
"Without investment from Hon Hai, Sharp will need to
raise at least 50 billion yen from the sale of overseas factories and
other assets to pay off the bond in September," said Deutsche Securities
analyst Yasuo Nakane. The rest of the money would come from cashflow
and fresh financing, he added.
The banks that bailed out Sharp in
September with $3.9 billion in emergency loans, including Mizuho
Financial Group Inc and Mitsubishi UFJ Financial Group Inc, are not
including a Hon Hai investment in a business plan they are hammering out
for Japan's leading LCD panel maker, sources told Reuters last month.
next step for Sharp is bank financing, an executive at one of the banks
and a separate source at Sharp told Reuters. Fresh loans could total
around $1 billion, according to analysts, which would raise the cost of
Sharp's bailout to about $5 billion.
Sharp's shareholder equity
ratio at the end of 2012 was 9.6 percent, less than half the 20 percent
usually considered the minimum for financial health.
To secure its
bailout last year, Sharp pledged to cut jobs and sell assets while
mortgaging nearly all of its factories and offices inJapan, leaving it
with only overseas assets that could be sold to improve its finances.
junk rating from credit agencies has made raising money in the credit
markets expensive for Sharp. Standard & Poor's ratesSharp's debt as
B+, a highly speculative grade, while Fitch Ratings has Sharp at B-.
Moody's Investors Service withdrew its rating on Sharp in April.
© Thomson Reuters 2013