By Eric Pfanner And Atsuko Fukase
TOKYO-- Sharp Corp. President Kozo Takahashi plans to meet with
the troubled electronics company's two main lenders on Thursday to
ask for a new round of financial support, less than three years
after its last bailout, according to people familiar with the
situation.
Mr. Takahashi is expected to present a turnaround plan to the
core banking units of Mitsubishi UFJ Financial Group Inc. and
Mizuho Financial Group Inc., which together hold more than Yen400
billion ($3.3 billion) in Sharp debt. People briefed on Sharp's
interactions with its lenders said the plan could include exiting
businesses such as solar panels and seeking funds from other
investors.
The people said a debt-for-equity swap was one of the options
being considered. Such maneuvers typically involve a lender
exchanging debt for an ownership stake in the debtor. One of the
people said Mr. Takahashi also plans to meet with several companies
that might be interested in investing in Sharp, which makes LCD
panels for Apple Inc. and other smartphone providers as well as
consumer goods.
The company, long among Japan's best-known consumer-electronics
brands, hit a rough spot after the 2008 global financial crisis in
part because of excess investment in LCD factories. After a brief
turnaround, it has run into trouble again in recent months because
rivals including Japan Display Inc. and low-cost Chinese makers
grabbed market share in LCD panels.
In a statement issued in response to a report in business daily
the Nikkei, Sharp said it had made no decisions and would outline
its restructuring plans in May. The company said that for now it
had no plans to change its financial forecast for the year ending
March 31, which predicts a net loss of Yen30 billion.
"We are currently considering various possibilities based on
drastic reform," the company said.
On Tuesday, Standard & Poor's Ratings Services lowered its
long-term corporate credit and debt ratings on Sharp to CCC+,
meaning the company is vulnerable and dependent on favorable
business conditions to meet its commitments. S&P cited the
possibility of a debt-for-equity swap or other measures to ease the
company's debt burden, describing such moves as a "selective
default."
"Our ratings on Sharp have heavily reflected support from its
main lender banks," S&P said. "We believe financial market
conditions for Sharp may deteriorate further."
Sharp shares closed down 3.5% in Tokyo on Tuesday, regaining
some ground after falling as much as 10% in early trading.
Sharp went through a near-death experience several years ago and
at one point said it had doubts about its ability to remain a going
concern. It pulled through after reaching a loan agreement with its
lenders in September 2012 and later selling stakes to several
companies, including Samsung Electronics Co. and Qualcomm Inc.
Analysts say bailout options this time could include Samsung
increasing its stake in Sharp, currently 3%. Samsung didn't
immediately have a comment.
Sharp's recent troubles have coincided with a rebound at Japan
Display. A person familiar with the situation said in February that
Japan Display was considering a significant expansion of its
Japanese manufacturing operations in order to supply screens to
Apple.
Unlike many other Japanese manufacturers, Sharp has been hurt by
the weakness of the yen. Sharp's consumer appliance arm is heavily
dependent on the Japanese market but imports many of the products
it sells, so its costs in yen terms have risen.
"We believe fundraising is inevitable in the end," analysts at
J.P. Morgan wrote in a note to investors.
Min-Jeong Lee contributed to this article.
Write to Eric Pfanner at eric.pfanner@wsj.com and Atsuko Fukase
at atsuko.fukase@wsj.com
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