TOKYO – Mizuho Corporate Bank and Bank of Tokyo-Mitsubishi UFJ are considering a roughly Y100 billion credit facility for Sharp Corp. (6753.TO) to help the embattled electronics firm meet an upcoming bond redemption, the Nikkei reported in its Thursday morning edition.
The banks are moving toward creating a fresh credit line to ensure that Sharp can meet redemption requests for roughly Y200 billion in convertible bonds maturing this September. The company is still expected to do what it can to raise funds on its own by selling assets and taking other steps.
In addition, the two lenders have decided to give Sharp an extension on a total of Y360 billion in lending that matures in June. With the new facility, credit extended to Sharp by the two main banks, which stood at about Y200 billion as of March 31 last year, is expected to rise to around Y800 billion.
Mizuho Corporate Bank had already announced its intention to dispatch high-ranking officials from group firms to Sharp to serve as directors or take similar posts. Bank of Tokyo-Mitsubishi UFJ has decided to follow suit and will send former executives well-versed in rehabilitation and investing.
The new credit facility is expected to allow Sharp to deal with immediate liquidity issues, but more fundamental problems remain. Sharp likely earned an operating profit in the second half of fiscal 2012 as requested by its main banks. Still, the impairment losses on LCD production facilities and other factors probably widened consolidated losses for the fiscal year beyond the projected Y450 billion.
Sharp is also due to see Y30 billion in straight bonds mature in March 2014 and another Y100 billion mature that September. And its capital ratio stood at 9.6% as of the end of 2012, far short of the 20-30% considered healthy for manufacturers.
While agreements have been reached for investments of about Y10 billion each from Qualcomm Inc. and Samsung Electronics Co., negotiations for a capital injection from Hon Hai Precision Industry Co. have bogged down. Sharp thus cannot afford to lose any time in strengthening its earnings and finances.
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