Sharp faces cash squeeze as Fox­conn takeover talks on

The Pak Banker - - COMPANIES/BOSS -

Sharp Corp. is fac­ing a po­ten­tial cash crunch at the end of this month as talks drag on with Fox­conn Tech­nol­ogy Group for a res­cue deal that would in­ject bil­lions of dol­lars in new cap­i­tal into the strug­gling Ja­panese elec­tron­ics maker.

Sharp has 510 bil­lion yen ($4.5 bil­lion) in credit lines and loans that are set to ex­pire on March 31 and the banks need the com­pany to strike an agree­ment for a bailout be­fore those loans are re­newed, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter. The banks, Mizuho Fi­nan­cial Group and Mit­subishi UFJ Fi­nan­cial Group, could fin­ish the re­newals by the dead­line if Sharp and Fox­conn reach fi­nal terms next week, said the peo­ple, who couldn't be iden­ti­fied be­cause the mat­ter is pri­vate.

"Sharp can do noth­ing with­out get­ting money," said Mana Naka­zora, chief credit an­a­lyst in Tokyo at BNP Paribas SA. "The com­pany would die if no­body helps them, though it is an un­likely sce­nario that the banks don't help Sharp."

Sharp's need for cash is the back­drop to one of the more bizarre takeovers in Ja­panese cor­po­rate his­tory. Fox­conn fought for months against the govern­ment-backed In­no­va­tion Net­work Corp. of Ja­pan in the takeover bat­tle, and last Thurs­day Sharp's board voted in fa­vor of the Tai­wanese com­pany's of­fer. Hours later Fox­conn said it would post­pone the deal un­til it sorted through new in­for­ma­tion it had just re­ceived from Sharp.

Sharp has been los­ing money for years and its need for fi­nan­cial sup­port set off the takeover bat­tle last year. Sharp's cash to­taled 208.5 bil­lion yen at the end of De­cem­ber, and it is pro­jected to lose more than 100 bil­lion yen in the fis­cal year that ends this month, ac­cord­ing to es­ti­mates com­piled by Bloomberg.

Toy­odo Ue­mura, a spokesman for Sharp, de­clined to com­ment. Its two pri­mary banks ar­ranged the syn­di­cated loans that will ex­pire March 31. They in­clude a term loan of 180 bil­lion yen, one line of credit for 180 bil­lion yen and an­other line of credit for 150 bil­lion yen. Time is run­ning short to re­new those loans be­cause the two lenders need time to ex­plain the sit­u­a­tion to other banks in­volved in the fi­nanc­ing, said the peo­ple.

The banks would suf­fer fi­nan­cial fall­out if they don't pro­vide fi­nanc­ing to Sharp in one form or an­other. The lenders hold both the com­pany's debt and equity and stand to lose if Sharp runs out of cash.

INCJ has no plans to ap­proach Sharp about re­viv­ing its deal, said one of the peo­ple fa­mil­iar with the mat­ter. How­ever, INCJ may be open to dis­cus­sions if Sharp gives up on Fox­conn and re­opens dis­cus­sions with the govern­ment fund, the per­son said.

"If Sharp can­not close the deal with Fox­conn, it wouldn't be strange for Sharp to talk with INCJ again," said Naka­zora. "Con­sid­er­ing the sit­u­a­tion of the banks, Sharp has to have a di­rec­tion by the end of March."

Sharp's stock has tum­bled since Fox­conn said it would de­lay a defini­tive agree­ment. The shares are down 26 per­cent since Feb. 24 in­clud­ing a 0.8 per­cent de­cline to 128 yen in Tokyo trad­ing.

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